Investing in real estate is one of the most reliable ways to build wealth, but simply buying a property doesn't guarantee profit. To succeed, investors must accurately calculate the Cash Flow—the net amount of cash moving in and out of a business.
This calculator helps you analyze the profitability of a potential rental property by factoring in mortgage payments, operating expenses, and vacancy rates. Understanding these metrics ensures you don't buy a liability masquerading as an asset.
Key Metrics Explained
1. Monthly Cash Flow
This is your profit after all expenses are paid. It is calculated as:
Total Income (Rent) minus Total Expenses (Mortgage, Tax, Insurance, Maintenance, Vacancy).
A positive cash flow indicates the property pays for itself and generates income. A negative cash flow means you are paying out of pocket to hold the property.
2. Cash on Cash ROI
Cash on Cash Return on Investment (ROI) measures the annual return you earn on the cash you actually invested (Down Payment + Closing Costs). It is a critical metric because it tells you how hard your money is working compared to other investments like the stock market.
Formula: (Annual Cash Flow / Total Cash Invested) × 100
3. Cap Rate (Capitalization Rate)
The Cap Rate indicates the rate of return on a real estate investment property based on the income that the property is expected to generate, ignoring the mortgage financing. This allows you to compare properties apples-to-apples regardless of how they are financed.
Formula: (Net Operating Income / Current Market Value) × 100
Common Expenses to Consider
When using this calculator, ensure you aren't underestimating expenses. Common pitfalls include:
Vacancy Rate: Properties are rarely occupied 365 days a year. A standard conservative estimate is 5-8%.
Maintenance: Roofs leak and toilets break. Budgeting 10-15% of the rent for repairs is prudent.
Property Management: If you hire a manager, expect to pay 8-10% of the monthly rent.
Use the tool above to run different scenarios. Adjust the purchase price, down payment, or rental income to see how sensitive your investment is to market changes.
function calculateRentalCashFlow() {
// Get Input Values
var price = parseFloat(document.getElementById('purchasePrice').value) || 0;
var downPayment = parseFloat(document.getElementById('downPayment').value) || 0;
var interestRate = parseFloat(document.getElementById('interestRate').value) || 0;
var loanTerm = parseFloat(document.getElementById('loanTerm').value) || 0;
var rent = parseFloat(document.getElementById('monthlyRent').value) || 0;
var tax = parseFloat(document.getElementById('annualTax').value) || 0;
var insurance = parseFloat(document.getElementById('annualInsurance').value) || 0;
var maintenance = parseFloat(document.getElementById('monthlyMaintenance').value) || 0;
var vacancyRate = parseFloat(document.getElementById('vacancyRate').value) || 0;
// Calculations
var loanAmount = price – downPayment;
var monthlyRate = (interestRate / 100) / 12;
var numPayments = loanTerm * 12;
// Mortgage Payment Calculation (P * r * (1+r)^n) / ((1+r)^n – 1)
var mortgagePayment = 0;
if (loanAmount > 0 && interestRate > 0) {
mortgagePayment = (loanAmount * monthlyRate * Math.pow(1 + monthlyRate, numPayments)) / (Math.pow(1 + monthlyRate, numPayments) – 1);
} else if (loanAmount > 0 && interestRate === 0) {
mortgagePayment = loanAmount / numPayments;
}
// Monthly Expenses Breakdown
var monthlyTax = tax / 12;
var monthlyInsurance = insurance / 12;
var vacancyLoss = rent * (vacancyRate / 100);
var totalOperatingExpenses = monthlyTax + monthlyInsurance + maintenance + vacancyLoss;
var totalExpenses = totalOperatingExpenses + mortgagePayment;
// Net Operating Income (NOI) = Rent – Operating Expenses (excluding mortgage)
var noiMonthly = rent – totalOperatingExpenses;
var noiAnnual = noiMonthly * 12;
// Cash Flow
var monthlyCashFlow = rent – totalExpenses;
var annualCashFlow = monthlyCashFlow * 12;
// Cash on Cash ROI
var roi = 0;
if (downPayment > 0) {
roi = (annualCashFlow / downPayment) * 100;
}
// Cap Rate
var capRate = 0;
if (price > 0) {
capRate = (noiAnnual / price) * 100;
}
// Display Results
document.getElementById('resMortgage').innerText = formatCurrency(mortgagePayment);
document.getElementById('resExpenses').innerText = formatCurrency(totalExpenses);
document.getElementById('resNOI').innerText = formatCurrency(noiMonthly);
var cfElement = document.getElementById('resCashFlow');
cfElement.innerText = formatCurrency(monthlyCashFlow);
if (monthlyCashFlow >= 0) {
cfElement.className = "result-value positive-cf";
} else {
cfElement.className = "result-value negative-cf";
}
document.getElementById('resROI').innerText = roi.toFixed(2) + "%";
document.getElementById('resCapRate').innerText = capRate.toFixed(2) + "%";
// Show Results Section
document.getElementById('resultsSection').style.display = 'block';
}
function formatCurrency(num) {
return "$" + num.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
}