Rental Property Cash Flow & ROI Calculator
Monthly Mortgage (P&I):
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Total Monthly Expenses:
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Monthly Cash Flow:
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Annual Cash Flow:
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Cash-on-Cash Return:
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Cap Rate:
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Understanding Rental Property Cash Flow
Successful real estate investing isn't just about property appreciation; it's about consistent, monthly cash flow. This Rental Property Cash Flow Calculator helps you determine the viability of an investment by subtracting all debt obligations and operating expenses from your gross rental income.
Key Metrics for Real Estate Investors
- Cash-on-Cash Return: This measures the annual return you receive on the actual cash you invested (your down payment and closing costs). It is calculated by dividing the Annual Cash Flow by the Total Cash Invested.
- Cap Rate (Capitalization Rate): This evaluates the property's natural rate of return without considering financing. It is calculated by taking the Net Operating Income (NOI) and dividing it by the purchase price.
- The 1% Rule: A common rule of thumb suggesting a property should rent for at least 1% of its purchase price to likely achieve positive cash flow.
Real-World Example Calculation
Imagine you purchase a duplex for $300,000 with a 20% down payment ($60,000). If your monthly mortgage payment is $1,500 and your other expenses (property tax, insurance, and maintenance) total $500, your total monthly outlay is $2,000.
If the property generates $2,600 in monthly rent, your cash flow is $600 per month. Annually, this is $7,200. To find your Cash-on-Cash return, divide $7,200 by your $60,000 investment, resulting in a 12% CoC return.
How to Improve Your Rental ROI
If your results are lower than expected, consider these strategies:
- Minimize Vacancy: High turnover is the biggest "hidden" expense in rental property management.
- Value-Add Renovations: Minor cosmetic updates like fresh paint or modern fixtures can justify higher rent premiums.
- Tax Incentives: Utilize depreciation and interest deductions to offset your taxable rental income.