Rental Property Cash Flow Calculator
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Understanding Rental Property Cash Flow
Cash flow is the lifeblood of any real estate investment. It represents the net amount of money that moves in and out of a business—in this case, your rental property—each month. A positive cash flow means your property is generating income after all expenses are paid, while a negative cash flow implies that you are losing money on the asset every month.
Using a Rental Property Cash Flow Calculator is essential for investors to evaluate a deal before purchasing. It helps remove emotion from the decision-making process, relying instead on cold, hard numbers to determine the viability of an investment.
The Golden Rule: Never buy a rental property based solely on potential appreciation. Always ensure the property produces positive cash flow from day one to mitigate risk during market downturns.
How to Calculate Rental Cash Flow
The formula for calculating rental property cash flow involves three main steps. Our calculator handles these automatically, but understanding the math helps you become a better investor.
1. Calculate Gross Income
This is the total income the property generates. It includes the monthly rent plus any additional income sources such as coin-operated laundry, parking fees, or pet fees.
2. Deduct Operating Expenses
Operating expenses are the costs required to run the property. These fall into two categories:
- Fixed Expenses: Property taxes, insurance, and HOA fees.
- Variable Expenses: These are percentage-based estimates, including vacancy (money lost when the unit is empty), repairs, capital expenditures (CapEx for big-ticket items like roofs), and property management fees.
Subtracting Operating Expenses from Gross Income gives you the Net Operating Income (NOI).
3. Subtract Debt Service
Finally, subtract your monthly mortgage payment (Principal and Interest) from the NOI. The remaining number is your Cash Flow.
Key Metrics Explained
Vacancy Rate: Even in hot markets, tenants move out. A standard conservative estimate is 5% to 8%, representing roughly 2-4 weeks of vacancy per year.
CapEx (Capital Expenditures): Unlike regular repairs, CapEx covers major replacements like HVAC systems, roofs, or flooring. Smart investors set aside 5-10% of rent monthly so funds are available when these expensive items expire.
Frequently Asked Questions
What is a good cash flow per door?
While "good" is subjective, many investors aim for at least $100 to $200 in net positive cash flow per unit per month. In more expensive markets, investors might accept lower cash flow in exchange for higher appreciation potential.
Should I include property management if I self-manage?
Yes. Even if you manage the property yourself, you should account for the cost of your time. Furthermore, calculating this expense ensures the deal still works if you eventually decide to hire a professional manager.
function calculateRentalCashFlow() {
// 1. Get Values
var rent = parseFloat(document.getElementById('monthlyRent').value) || 0;
var otherIncome = parseFloat(document.getElementById('otherIncome').value) || 0;
var mortgage = parseFloat(document.getElementById('mortgagePayment').value) || 0;
var tax = parseFloat(document.getElementById('propertyTax').value) || 0;
var insurance = parseFloat(document.getElementById('insurance').value) || 0;
var hoa = parseFloat(document.getElementById('hoaFees').value) || 0;
var vacancyRate = parseFloat(document.getElementById('vacancyRate').value) || 0;
var repairsRate = parseFloat(document.getElementById('repairs').value) || 0;
var capexRate = parseFloat(document.getElementById('capex').value) || 0;
var mgmtRate = parseFloat(document.getElementById('managementFee').value) || 0;
// 2. Calculate Gross Potential Income
var grossIncome = rent + otherIncome;
// 3. Calculate Variable Expenses (Percentage of Rent)
// Note: Usually % expenses are based on Rent, not Rent + Other, but can vary. We will use Rent for conservation.
var vacancyCost = rent * (vacancyRate / 100);
var repairsCost = rent * (repairsRate / 100);
var capexCost = rent * (capexRate / 100);
var mgmtCost = rent * (mgmtRate / 100);
// 4. Calculate Total Expenses
var totalVariableExpenses = vacancyCost + repairsCost + capexCost + mgmtCost;
var totalFixedExpenses = tax + insurance + hoa;
var operatingExpenses = totalVariableExpenses + totalFixedExpenses;
// 5. Calculate Metrics
// Effective Gross Income usually subtracts vacancy, but for simple cash flow,
// we treat vacancy as an expense line item here for clarity.
// NOI = Income – Operating Expenses (Excluding Mortgage)
// Actually, Vacancy is a contra-income account, but mathematically subtracting it works the same.
var noi = grossIncome – operatingExpenses;
var totalExpensesIncludingMortgage = operatingExpenses + mortgage;
var cashFlow = noi – mortgage;
// 6. formatting
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
});
// 7. Update UI
document.getElementById('resultGrossIncome').innerText = formatter.format(grossIncome);
document.getElementById('resultTotalExpenses').innerText = formatter.format(totalExpensesIncludingMortgage);
document.getElementById('resultNOI').innerText = formatter.format(noi);
var cashFlowEl = document.getElementById('resultCashFlow');
cashFlowEl.innerText = formatter.format(cashFlow);
if (cashFlow < 0) {
cashFlowEl.classList.add('negative-flow');
} else {
cashFlowEl.classList.remove('negative-flow');
}
// Show results
document.getElementById('resultsSection').style.display = 'block';
}