Rental Property Cash Flow Calculator
Analyzing a real estate investment requires more than just looking at the purchase price. Successful investors use a Rental Property Cash Flow Calculator to determine if a specific property will generate profit (positive cash flow) or cost money to hold (negative cash flow) every month.
This tool helps you calculate the net monthly income by factoring in mortgage payments, operating expenses, and vacancy rates to provide a clear picture of your potential Return on Investment (ROI).
Understanding the Metrics
Net Monthly Cash Flow
This is the profit remaining after all expenses are paid. The formula used is:
Cash Flow = Rental Income – (Mortgage + Operating Expenses + Vacancy Allowance)
A positive number indicates the property is generating income, while a negative number means you are paying out of pocket to keep the property.
Cash on Cash Return (CoC)
This metric measures the annual return on the actual cash you invested (down payment), rather than the total loan amount. It is calculated as:
CoC = (Annual Cash Flow / Total Cash Invested) × 100
Generally, a Cash on Cash return of 8-12% is considered a solid investment in real estate, though this varies by market.
Real World Example
Let's assume you purchase a property for $300,000 with a 20% down payment ($60,000). You secure a loan at 6.5% interest for 30 years.
- Loan Amount: $240,000
- Monthly Mortgage: ~$1,517
- Rental Income: $2,500/month
- Operating Expenses: $600/month (Taxes, Insurance, Repairs)
- Vacancy (5%): $125/month
Total Expenses: $1,517 + $600 + $125 = $2,242
Net Cash Flow: $2,500 – $2,242 = $258 / month
Annual Cash Flow: $3,096
Your Cash on Cash return would be $3,096 / $60,000 = 5.16%.