Interest Rate Calculator Hk

Rental Property Cash Flow Calculator

Analyze the profitability of your next real estate investment.

Investing in real estate requires a meticulous breakdown of numbers. A "good deal" isn't just about a rising property value; it's about the monthly income that remains after all obligations are met. This calculator helps you determine if a property will be a "cash cow" or a "money pit."

Understanding the Key Metrics

1. Net Operating Income (NOI)

NOI is the total income generated by the property minus all operating expenses (excluding mortgage payments). This metric shows how well the property produces income independent of its financing.

2. Cap Rate (Capitalization Rate)

The Cap Rate is calculated by dividing the annual NOI by the purchase price. It allows investors to compare different properties regardless of how they are financed. A cap rate between 5% and 10% is often targeted by residential investors.

3. Cash on Cash Return (CoC)

CoC return is the annual cash flow divided by the total cash invested (usually the down payment plus closing costs). This is often considered the most important metric because it tells you the actual ROI on the "liquid" money you tied up in the deal.

Example Calculation

Imagine you buy a duplex for $300,000 with 20% down ($60,000).

• Monthly Rent: $2,500
• Mortgage (6.5%): $1,517
• Taxes & Insurance: $400/mo
• Management & Maint (20%): $500/mo

In this scenario, your total expenses are $2,417. Your Monthly Cash Flow would be $83. While positive, your Cash on Cash return would be low, signaling that you might need to negotiate a lower price or find a property with higher rent potential.

Factors to Remember

Don't forget to account for Vacancy Rates. Even the best properties sit empty occasionally. Standard practice is to budget 5-8% of gross rent for vacancy. Similarly, CapEx (Capital Expenditures) covers big-ticket items like new roofs or HVAC systems that will eventually need replacement.