function calculateRentalCashFlow() {
// Get Inputs
var price = parseFloat(document.getElementById('rp-purchase-price').value) || 0;
var closingCosts = parseFloat(document.getElementById('rp-closing-costs').value) || 0;
var downPercent = parseFloat(document.getElementById('rp-down-payment-percent').value) || 0;
var interestRate = parseFloat(document.getElementById('rp-interest-rate').value) || 0;
var loanTermYears = parseFloat(document.getElementById('rp-loan-term').value) || 30;
var rentIncome = parseFloat(document.getElementById('rp-rent-income').value) || 0;
var vacancyRate = parseFloat(document.getElementById('rp-vacancy-rate').value) || 0;
var annualTax = parseFloat(document.getElementById('rp-property-tax').value) || 0;
var annualInsurance = parseFloat(document.getElementById('rp-insurance').value) || 0;
var maintenanceRate = parseFloat(document.getElementById('rp-maintenance').value) || 0;
var monthlyHOA = parseFloat(document.getElementById('rp-hoa').value) || 0;
var managementRate = parseFloat(document.getElementById('rp-management').value) || 0;
// Calculations – Initial Investment
var downPayment = price * (downPercent / 100);
var loanAmount = price – downPayment;
var totalInvested = downPayment + closingCosts;
// Calculations – Mortgage
var monthlyRate = (interestRate / 100) / 12;
var numPayments = loanTermYears * 12;
var monthlyMortgage = 0;
if (interestRate > 0) {
monthlyMortgage = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, numPayments)) / (Math.pow(1 + monthlyRate, numPayments) – 1);
} else {
monthlyMortgage = loanAmount / numPayments;
}
// Calculations – Income Adjustments
var vacancyLoss = rentIncome * (vacancyRate / 100);
var effectiveGrossIncome = rentIncome – vacancyLoss;
// Calculations – Operating Expenses
var monthlyTax = annualTax / 12;
var monthlyInsurance = annualInsurance / 12;
var maintenanceCost = rentIncome * (maintenanceRate / 100);
var managementCost = rentIncome * (managementRate / 100);
var totalOperatingExpenses = monthlyTax + monthlyInsurance + maintenanceCost + monthlyHOA + managementCost;
var totalExpenses = totalOperatingExpenses + monthlyMortgage;
// Metrics
var monthlyCashFlow = effectiveGrossIncome – totalExpenses;
var annualCashFlow = monthlyCashFlow * 12;
var annualNOI = (effectiveGrossIncome – totalOperatingExpenses) * 12;
var cashOnCash = 0;
if (totalInvested > 0) {
cashOnCash = (annualCashFlow / totalInvested) * 100;
}
var capRate = 0;
if (price > 0) {
capRate = (annualNOI / price) * 100;
}
// Formatting
function formatCurrency(num) {
return "$" + num.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
}
// Display Results
document.getElementById('res-mortgage').innerText = formatCurrency(monthlyMortgage);
document.getElementById('res-expenses').innerText = formatCurrency(totalExpenses);
document.getElementById('res-noi').innerText = formatCurrency(annualNOI / 12);
var cashFlowEl = document.getElementById('res-cashflow');
cashFlowEl.innerText = formatCurrency(monthlyCashFlow);
if (monthlyCashFlow >= 0) {
cashFlowEl.className = "rp-result-value rp-highlight";
} else {
cashFlowEl.className = "rp-result-value rp-negative";
}
document.getElementById('res-coc').innerText = cashOnCash.toFixed(2) + "%";
document.getElementById('res-cap').innerText = capRate.toFixed(2) + "%";
document.getElementById('res-invested').innerText = formatCurrency(totalInvested);
// Show Results Container
document.getElementById('rp-results').style.display = "block";
}
Understanding Rental Property Cash Flow
Investing in real estate is a popular strategy for building wealth, but success ultimately hinges on the numbers. The most critical metric for buy-and-hold investors is Cash Flow. This calculator helps you determine if a potential rental property will be an asset that puts money in your pocket every month or a liability that drains your resources.
What is Positive Cash Flow?
Positive cash flow occurs when a property's gross monthly income exceeds the sum of all expenses, including the mortgage, taxes, insurance, and operating costs. A property with positive cash flow generates a passive income stream, allowing you to reinvest in more properties or cover personal expenses.
Key Metrics Explained
Net Operating Income (NOI): This is your total income minus operating expenses, excluding mortgage payments. It measures the profitability of the property itself, regardless of financing.
Cash on Cash Return (CoC): This is arguably the most important metric for investors. It measures the annual return on the actual cash you invested (down payment + closing costs). A CoC return of 8-12% is often considered a solid benchmark for rental properties.
Cap Rate (Capitalization Rate): This percentage indicates the expected rate of return on a property assuming it was bought entirely with cash. It is useful for comparing the relative value of different properties quickly.
Why Factor in Vacancy and Maintenance?
Novice investors often make the mistake of calculating cash flow based solely on rent minus the mortgage. However, real life happens. Tenants move out (Vacancy Rate), and toilets break (Maintenance). This calculator allows you to set aside a percentage of monthly rent to cover these inevitable costs, ensuring your cash flow projection remains realistic and conservative.
How to Improve Cash Flow
If the calculator shows a negative or low cash flow, consider these strategies:
Negotiate the Price: Lowering the purchase price reduces your loan amount and monthly mortgage payment.
Increase the Down Payment: Putting more money down reduces the principal loan amount, lowering monthly debt service.
Value-Add Improvements: Renovations can justify higher rent, increasing your gross income.
Shop for Insurance/Rates: Even a small reduction in interest rates or insurance premiums can significantly boost monthly margins.