Rental Property Cash Flow Calculator
Analyze your real estate investment deals accurately.
Understanding Rental Property Cash Flow
Successful real estate investing hinges on the ability to accurately calculate cash flow. Cash flow is the net amount of money moving in and out of a business—in this case, your rental property. Positive cash flow means your property is generating profit after all expenses, while negative cash flow implies you are losing money every month to hold the asset.
How to Calculate Cash Flow
The basic formula for rental property cash flow is:
Cash Flow = Gross Income – Total Expenses
While this sounds simple, "Total Expenses" includes much more than just the mortgage payment. Investors must account for vacancy (periods where the property is empty), repairs, capital expenditures (replacing a roof or HVAC), property management fees, taxes, and insurance.
Key Metrics in Real Estate Analysis
Cash on Cash Return (CoC ROI)
This metric measures the annual return on the actual cash you invested. Unlike Cap Rate, it takes into account debt service (your mortgage). It is calculated by dividing your annual pre-tax cash flow by your total cash invested (down payment + closing costs + rehab costs).
Cap Rate (Capitalization Rate)
Cap Rate is used to evaluate the profitability of a property independent of its financing. It is calculated by dividing the Net Operating Income (NOI) by the current market value or purchase price of the property. A higher cap rate generally implies a better return, but often comes with higher risk.
Net Operating Income (NOI)
NOI is your total income minus operating expenses. Crucially, NOI does not include mortgage payments. It represents the profitability of the property itself, regardless of how you financed it.
The 1% Rule
A common "rule of thumb" for initial screening is the 1% rule, which suggests 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. While not a hard rule, properties that meet this criteria are more likely to cash flow positively.