Rental Property Cash Flow Calculator
Analysis Results
Understanding Your Rental Property Analysis
Investing in real estate requires precise calculations to ensure a property will generate profit rather than drain your resources. This Rental Property Cash Flow Calculator helps investors evaluate the viability of a potential deal by breaking down the three most critical metrics: Cash Flow, Cash-on-Cash Return, and Cap Rate.
Key Metrics Explained
1. Net Operating Income (NOI)
Formula: Gross Income – Operating Expenses (excluding mortgage)
NOI represents the profitability of a property before debt service (mortgage) is considered. It is a pure measure of the asset's ability to generate revenue. A positive NOI is essential, but it doesn't account for the cost of financing.
2. Cash Flow
Formula: NOI – Mortgage Payments (Principal & Interest)
This is the actual "money in your pocket" at the end of every month. Positive cash flow means the property pays for itself and generates income. A common goal for beginners is $100-$200 per door in pure positive cash flow after all expenses and reserves.
3. Cash-on-Cash Return (CoC)
Formula: (Annual Cash Flow / Total Cash Invested) × 100
This metric compares your annual profit to the actual cash you put into the deal (Down Payment + Closing Costs + Initial Repairs). Unlike Cap Rate, CoC accounts for leverage (financing), giving you a realistic view of how hard your specific dollars are working for you. A CoC return of 8-12% is often considered a solid benchmark in many markets.
4. Cap Rate (Capitalization Rate)
Formula: (NOI / Purchase Price) × 100
Cap Rate measures the rate of return on a real estate investment property based on the income that the property is expected to generate. It assumes the property is bought with cash, making it a useful tool to compare different properties regardless of financing terms.
Example Calculation
Imagine purchasing a property for $200,000 with 20% down ($40,000). If the property generates $2,000/month in rent and has $800/month in operating expenses (taxes, insurance, vacancy reserve), your NOI is $1,200/month.
If your mortgage is $900/month, your Cash Flow is $300/month ($3,600/year). If your total cash invested was $45,000 (including closing costs), your Cash-on-Cash return would be 8% ($3,600 / $45,000).