Rental Property Cash Flow Calculator
Purchase & Loan Details
Income & Expenses
Monthly Analysis
Gross Income:
$0.00
– Vacancy Loss:
$0.00
– Operating Expenses (Tax, Ins, Maint, PM):
$0.00
– Mortgage Payment (P&I):
$0.00
Net Monthly Cash Flow:
$0.00
0.00%
Cap Rate
0.00%
Cash on Cash
$0
Annual NOI
How to Analyze a Rental Property Investment
Investing in real estate is a powerful way to build wealth, but simply buying a property doesn't guarantee a profit. Successful real estate investors rely on accurate numbers, not gut feelings. This Rental Property Cash Flow Calculator helps you determine the viability of a potential investment by breaking down income, operating expenses, and debt service.
Key Metrics Explained
When analyzing a deal, there are three primary metrics you should understand:
- Cash Flow: This is the profit you take home at the end of the month after paying all expenses and the mortgage. Positive cash flow ensures the property pays for itself and provides passive income.
- Cap Rate (Capitalization Rate): This measures the property's natural rate of return assuming you paid all cash. It is calculated by dividing the Net Operating Income (NOI) by the purchase price. A higher Cap Rate generally indicates a better return, though often comes with higher risk.
- Cash on Cash Return (CoC): This is arguably the most important metric for leveraged investors. It measures the annual cash flow relative to the total cash you actually invested (down payment + closing costs). It tells you how hard your specific dollars are working.
Understanding Operating Expenses
New investors often underestimate expenses. Beyond the mortgage, you must account for:
- Vacancy: Properties won't be rented 365 days a year. A 5-8% vacancy allowance is standard.
- Maintenance & CapEx: Toilets break and roofs need replacing. Setting aside 5-10% of rent for repairs and capital expenditures (CapEx) is crucial for long-term safety.
- Management Fees: Even if you self-manage, you should account for your time or the potential need to hire a manager later (typically 8-10% of rent).
The 1% Rule
A common "rule of thumb" for initial screening is the 1% Rule. It states that the monthly rent should be at least 1% of the purchase price. For example, a $200,000 home should rent for at least $2,000. While this rule is harder to find in high-cost markets, it serves as a quick filter before running a detailed analysis with the calculator above.
How to Improve Cash Flow
If the calculator shows negative or low cash flow, consider:
- Negotiating a lower purchase price.
- Increasing the down payment to lower the mortgage payment.
- Looking for ways to increase rent (renovations, adding amenities).
- Shopping for lower insurance rates or property taxes (via appeal).