Rental Property Cash Flow & ROI Calculator
Successful real estate investing relies on accurate math, not just intuition. This Rental Property Cash Flow Calculator helps investors analyze potential deals by determining the Net Operating Income (NOI), monthly cash flow, Cap Rate, and Cash on Cash Return. Simply enter the purchase details, financing terms, and projected expenses below to see if your investment property is a true asset or a liability.
Understanding Rental Property Metrics
When analyzing a real estate investment, relying solely on the monthly rent price is a mistake. Professional investors use specific Key Performance Indicators (KPIs) to evaluate the profitability of a deal. This calculator breaks down the three most critical metrics: Cash Flow, Cap Rate, and Cash on Cash Return.
1. Net Operating Income (NOI)
NOI is the total income generated by the property minus all necessary operating expenses (vacancy, taxes, insurance, repairs). Crucially, NOI does not include mortgage payments. It represents the profitability of the asset itself, regardless of how it is financed.
Formula: Real Estate Revenue – Operating Expenses = NOI
2. Cash Flow
Cash flow is the profit you pocket every month after paying all operating expenses and the mortgage (debt service). Positive cash flow is essential for long-term sustainability, as it provides a buffer for unexpected repairs and generates passive income.
3. Cash on Cash Return (CoC)
While Cap Rate measures the property's potential, Cash on Cash Return measures the efficiency of your specific investment. It calculates the annual cash flow relative to the actual cash you invested (Down Payment + Closing Costs + Rehab Costs). This is often considered the most important metric for investors using leverage (mortgages).
- 8-12% CoC: Generally considered a good return in many markets.
- 15%+: Considered an excellent return, often found in riskier markets or off-market deals.
What are the 50% and 1% Rules?
Investors often use "napkin math" to screen properties quickly before using a detailed calculator like the one above:
- The 1% Rule: The monthly rent should be at least 1% of the purchase price. (e.g., A $200,000 home should rent for $2,000/month).
- The 50% Rule: Assume that 50% of your gross rental income will go toward operating expenses (excluding the mortgage). If the remaining 50% can cover the mortgage and leave a profit, it's worth investigating further.