function calculateCashFlow() {
// 1. Get Inputs
var price = parseFloat(document.getElementById('purchasePrice').value);
var downPayment = parseFloat(document.getElementById('downPayment').value);
var interestRate = parseFloat(document.getElementById('interestRate').value);
var termYears = parseFloat(document.getElementById('loanTerm').value);
var closingCosts = parseFloat(document.getElementById('closingCosts').value);
var repairCosts = parseFloat(document.getElementById('repairCosts').value);
var monthlyRent = parseFloat(document.getElementById('monthlyRent').value);
var vacancyRate = parseFloat(document.getElementById('vacancyRate').value);
var taxYear = parseFloat(document.getElementById('propertyTax').value);
var insuranceYear = parseFloat(document.getElementById('insurance').value);
var hoaMonth = parseFloat(document.getElementById('hoaFee').value);
var maintenanceRate = parseFloat(document.getElementById('maintenance').value);
var managementRate = parseFloat(document.getElementById('management').value);
// Validation
if (isNaN(price) || isNaN(monthlyRent)) {
alert("Please enter valid numbers for Price and Rent.");
return;
}
// Defaults for optionals
if (isNaN(downPayment)) downPayment = 0;
if (isNaN(closingCosts)) closingCosts = 0;
if (isNaN(repairCosts)) repairCosts = 0;
if (isNaN(hoaMonth)) hoaMonth = 0;
if (isNaN(taxYear)) taxYear = 0;
if (isNaN(insuranceYear)) insuranceYear = 0;
// 2. Mortgage Calculation
var loanAmount = price – downPayment;
var monthlyMortgage = 0;
if (loanAmount > 0 && interestRate > 0) {
var r = interestRate / 100 / 12;
var n = termYears * 12;
monthlyMortgage = loanAmount * ( (r * Math.pow(1 + r, n)) / (Math.pow(1 + r, n) – 1) );
} else if (loanAmount > 0 && interestRate === 0) {
monthlyMortgage = loanAmount / (termYears * 12);
}
// 3. Operating Calculations
var vacancyAmount = monthlyRent * (vacancyRate / 100);
var effectiveIncome = monthlyRent – vacancyAmount;
var maintenanceAmount = monthlyRent * (maintenanceRate / 100);
var managementAmount = monthlyRent * (managementRate / 100);
var taxMonth = taxYear / 12;
var insuranceMonth = insuranceYear / 12;
var operatingExpensesMonth = taxMonth + insuranceMonth + hoaMonth + maintenanceAmount + managementAmount;
var totalMonthlyExpenses = monthlyMortgage + operatingExpensesMonth;
var monthlyCashFlow = effectiveIncome – totalMonthlyExpenses;
var annualCashFlow = monthlyCashFlow * 12;
// 4. Metrics
// Net Operating Income (NOI) = (Rent – Vacancy) – Operating Expenses (excluding mortgage)
var annualNOI = (effectiveIncome – operatingExpensesMonth) * 12;
// Cap Rate = Annual NOI / Purchase Price
var capRate = (annualNOI / price) * 100;
// Cash on Cash Return = Annual Cash Flow / Total Cash Invested
var totalCashInvested = downPayment + closingCosts + repairCosts;
var cocReturn = 0;
if (totalCashInvested > 0) {
cocReturn = (annualCashFlow / totalCashInvested) * 100;
}
// 5. Update UI
document.getElementById('resGrossRent').innerText = "$" + monthlyRent.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resVacancy').innerText = "-$" + vacancyAmount.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resEffectiveIncome').innerText = "$" + effectiveIncome.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resMortgage').innerText = "$" + monthlyMortgage.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resOperatingExp').innerText = "$" + operatingExpensesMonth.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
var cfElement = document.getElementById('resCashFlow');
cfElement.innerText = "$" + monthlyCashFlow.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
cfElement.style.color = monthlyCashFlow >= 0 ? "#27ae60" : "#c0392b";
document.getElementById('resCoC').innerText = cocReturn.toFixed(2) + "%";
document.getElementById('resCapRate').innerText = capRate.toFixed(2) + "%";
document.getElementById('resNOI').innerText = "$" + annualNOI.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0});
document.getElementById('resultsArea').style.display = "block";
}
Understanding Rental Property Cash Flow
Cash flow is the lifeblood of any real estate investment. It represents the net amount of money moving in and out of a business or property. In the context of rental properties, positive cash flow means the property generates more income than it costs to operate, while negative cash flow means you are losing money every month.
Using a comprehensive Rental Property Calculator is essential for investors to evaluate a deal before signing the contract. By inputting your purchase price, expected rent, and all associated expenses, you can determine if a property meets your investment goals.
Key Metrics Explained
Cash on Cash Return (CoC): This is arguably the most important metric for rental investors. It measures the annual return on the actual cash you invested (Down Payment + Closing Costs + Repairs). A good CoC return is often considered to be between 8% and 12%, though this varies by market.
NOI (Net Operating Income): This calculation looks at the profitability of the property excluding the mortgage financing. It is calculated as: (Rental Income – Vacancy) – Operating Expenses. Note that mortgage principal and interest are NOT included in NOI.
Cap Rate (Capitalization Rate): Calculated as NOI / Purchase Price. This metric helps compare the profitability of different properties regardless of how they are financed. A higher cap rate generally indicates a higher potential return but often comes with higher risk.
The 1% Rule: A quick "rule of thumb" used by investors. 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/month to be considered a potentially good deal.
How to Accurately Estimate Expenses
One of the biggest mistakes new investors make is underestimating expenses. When using this calculator, ensure you account for:
Vacancy: Properties won't be occupied 365 days a year. A 5% to 8% vacancy rate is a standard conservative estimate.
Maintenance & CapEx: Even if the house is new, things break. Setting aside 5% to 10% of the rent for repairs ensures you have funds when the water heater fails or the roof needs patching.
Management Fees: Even if you plan to self-manage, you should account for your time or the future possibility of hiring a property manager (typically 8-10% of rent).
Interpreting Your Results
If the calculator shows a negative cash flow, the property is a liability rather than an asset, unless you are banking purely on appreciation (which is risky). If the cash flow is positive but the Cash on Cash return is lower than the inflation rate or what you could get in the stock market, you may want to reconsider the purchase price or find ways to increase the rental income.