Investing in real estate is a numbers game. Emotions should play a secondary role to the hard data of income, expenses, and return on investment (ROI). This Rental Property Cash Flow Calculator helps real estate investors quickly determine if a potential property is a sound investment or a money pit.
Key Metrics Explained
To use this calculator effectively, it is crucial to understand the definitions behind the numbers:
Cash Flow: This is the profit you bring in each month after all operating expenses and mortgage payments are made. A positive cash flow means the property pays you to own it.
Net Operating Income (NOI): This calculates the profitability of the property excluding the mortgage financing. It is calculated as Gross Income – Operating Expenses.
Cap Rate (Capitalization Rate): A measure of the property's natural rate of return. It is calculated as (Annual NOI / Purchase Price). This helps compare properties regardless of how they are financed.
Cash on Cash Return: This metric tells you how hard your actual invested cash is working. It compares your annual pre-tax cash flow to the total cash invested (down payment + closing costs + repairs).
The 1% Rule and 50% Rule
Seasoned investors often use "napkin math" before doing a deep dive with a calculator like this one. Two common rules of thumb are:
The 1% Rule: Does the monthly rent equal at least 1% of the purchase price? For a $200,000 home, the rent should be at least $2,000.
The 50% Rule: Assume that 50% of your gross rent will go toward operating expenses (taxes, insurance, maintenance, vacancy, management), not including the mortgage. If the remaining 50% covers the mortgage with room to spare, it might be a good deal.
Frequently Asked Questions
What is a good Cash on Cash return?
While this varies by investor goals and market conditions, many real estate investors target a Cash on Cash return of 8% to 12%. In highly appreciative markets, investors might accept lower cash flow returns (4-6%) banking on long-term equity growth.
Why include vacancy rates?
No property is occupied 100% of the time. Factoring in a vacancy rate (typically 5-8%) creates a conservative buffer in your calculations, ensuring you have reserves when a tenant moves out.
Does this calculator include appreciation?
No. This calculator focuses strictly on Cash Flow. While appreciation (the increase in property value over time) is a major benefit of real estate, relying on it for profitability is speculative. A solid investment should cash flow positively from day one.
function calculateRental() {
// 1. Get Input Values
var purchasePrice = parseFloat(document.getElementById('purchasePrice').value) || 0;
var downPaymentPercent = parseFloat(document.getElementById('downPayment').value) || 0;
var closingCosts = parseFloat(document.getElementById('closingCosts').value) || 0;
var rehabCosts = parseFloat(document.getElementById('rehabCosts').value) || 0;
var interestRate = parseFloat(document.getElementById('interestRate').value) || 0;
var loanTermYears = parseInt(document.getElementById('loanTerm').value) || 30;
var monthlyRent = parseFloat(document.getElementById('monthlyRent').value) || 0;
var vacancyRate = parseFloat(document.getElementById('vacancyRate').value) || 0;
var annualPropTax = parseFloat(document.getElementById('propertyTax').value) || 0;
var annualInsurance = parseFloat(document.getElementById('insurance').value) || 0;
var monthlyHOA = parseFloat(document.getElementById('hoa').value) || 0;
var maintenancePercent = parseFloat(document.getElementById('maintenance').value) || 0;
// 2. Calculate Loan Details
var downPaymentAmount = purchasePrice * (downPaymentPercent / 100);
var loanAmount = purchasePrice – downPaymentAmount;
// Mortgage Calculation (M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ])
var monthlyRate = (interestRate / 100) / 12;
var numberOfPayments = loanTermYears * 12;
var monthlyPI = 0;
if (monthlyRate > 0) {
monthlyPI = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1);
} else {
monthlyPI = loanAmount / numberOfPayments;
}
// 3. Calculate Income & Expenses
var vacancyLoss = monthlyRent * (vacancyRate / 100);
var effectiveGrossIncome = monthlyRent – vacancyLoss;
var maintenanceCost = monthlyRent * (maintenancePercent / 100);
var monthlyTax = annualPropTax / 12;
var monthlyInsurance = annualInsurance / 12;
var totalOperatingExpenses = monthlyTax + monthlyInsurance + monthlyHOA + maintenanceCost;
// 4. Calculate Metrics
var monthlyNOI = effectiveGrossIncome – totalOperatingExpenses;
var monthlyCashFlow = monthlyNOI – monthlyPI;
var annualCashFlow = monthlyCashFlow * 12;
var annualNOI = monthlyNOI * 12;
var totalCashInvested = downPaymentAmount + closingCosts + rehabCosts;
var cocReturn = 0;
if (totalCashInvested > 0) {
cocReturn = (annualCashFlow / totalCashInvested) * 100;
}
var capRate = 0;
if (purchasePrice > 0) {
capRate = (annualNOI / purchasePrice) * 100;
}
// 5. Display Results
var cashFlowEl = document.getElementById('monthlyCashFlowDisplay');
cashFlowEl.innerText = formatCurrency(monthlyCashFlow);
if (monthlyCashFlow >= 0) {
cashFlowEl.style.color = "#27ae60";
} else {
cashFlowEl.style.color = "#c0392b";
}
document.getElementById('noiDisplay').innerText = formatCurrency(monthlyNOI);
document.getElementById('mortgageDisplay').innerText = formatCurrency(monthlyPI);
document.getElementById('totalExpensesDisplay').innerText = formatCurrency(totalOperatingExpenses + monthlyPI); // Total outflow including mortgage
document.getElementById('cocDisplay').innerText = cocReturn.toFixed(2) + "%";
document.getElementById('capRateDisplay').innerText = capRate.toFixed(2) + "%";
document.getElementById('cashToCloseDisplay').innerText = formatCurrency(totalCashInvested);
document.getElementById('results-area').style.display = 'block';
}
function formatCurrency(num) {
return "$" + num.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
}