Rental Property Cash Flow & ROI Calculator
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Rental Property Cash Flow Calculator
Understanding Rental Property Cash Flow
Investing in real estate is a powerful way to build wealth, but the success of any rental property hinges on the numbers. This Rental Property Cash Flow Calculator helps investors determine if a potential property is an asset or a liability.
Cash Flow is the net amount of money moving in and out of a business. For a rental property, it is calculated by subtracting all operating expenses and debt service (mortgage) from the gross rental income. A positive cash flow means the property generates profit every month, while negative cash flow means you are losing money to hold the property.
Key Metrics in Real Estate Investing
1. Net Operating Income (NOI)
NOI is a calculation used to analyze the profitability of income-generating real estate investments. It equals all revenue from the property, minus all necessary operating expenses. Note that NOI excludes mortgage payments and taxes, focusing purely on the property's operational efficiency.
2. Cash on Cash ROI
Cash on Cash Return on Investment is arguably the most important metric for rental investors. It measures the annual return the investor made on the property in relation to the amount of mortgage paid during the same year. It is calculated as:
- (Annual Pre-Tax Cash Flow / Total Cash Invested) x 100
Total cash invested typically includes your down payment, closing costs, and any immediate renovation costs.
How to Use This Calculator
To get the most accurate results, ensure you have precise estimates for the following:
- Vacancy Rate: No property is rented 100% of the time. A standard conservative estimate is 5-8% (representing about 2-4 weeks of vacancy per year).
- Maintenance: Even new homes require upkeep. Budgeting 1% of the property value per year, or 10-15% of monthly rent, is a prudent practice.
- CapEx (Capital Expenditures): While not a specific field above, you should include savings for big-ticket items like roof replacement in your maintenance budget.
Frequently Asked Questions
What is a "good" Cash on Cash ROI?
While this varies by market and strategy, many investors aim for a Cash on Cash return of 8-12%. However, in high-appreciation markets, investors might accept a lower cash flow (4-6%) banking on the property's value increasing over time.
Should I include appreciation in my calculations?
Conservative investors generally do not factor appreciation into their cash flow analysis. Cash flow pays the bills today; appreciation is the bonus you realize when you sell or refinance in the future.
What happens if my cash flow is negative?
If the result shows a negative cash flow, the property costs more to own than it generates in rent. Unless you have a specific strategy involving rapid appreciation or significant tax benefits, negative cash flow properties are generally considered risky investments.
function calculateRentalROI() {
// 1. Get Input Values
var purchasePrice = parseFloat(document.getElementById('purchasePrice').value);
var downPayment = parseFloat(document.getElementById('downPayment').value);
var closingCosts = parseFloat(document.getElementById('closingCosts').value);
var interestRate = parseFloat(document.getElementById('interestRate').value);
var loanTermYears = parseFloat(document.getElementById('loanTerm').value);
var monthlyRent = parseFloat(document.getElementById('monthlyRent').value);
var vacancyRate = parseFloat(document.getElementById('vacancyRate').value);
var propertyTax = parseFloat(document.getElementById('propertyTax').value);
var insurance = parseFloat(document.getElementById('insurance').value);
var hoaFees = parseFloat(document.getElementById('hoaFees').value);
var maintenance = parseFloat(document.getElementById('maintenance').value);
// 2. Validate Inputs
if (isNaN(purchasePrice) || isNaN(downPayment) || isNaN(interestRate) || isNaN(monthlyRent) ||
isNaN(propertyTax) || isNaN(insurance) || isNaN(maintenance)) {
document.getElementById('error-message').style.display = 'block';
document.getElementById('results-area').style.display = 'none';
return;
} else {
document.getElementById('error-message').style.display = 'none';
}
// 3. Perform Calculations
// Loan Calculation
var loanAmount = purchasePrice – downPayment;
var monthlyRate = (interestRate / 100) / 12;
var numberOfPayments = loanTermYears * 12;
// Mortgage P&I Formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
var monthlyMortgage = 0;
if (loanAmount > 0) {
if (interestRate === 0) {
monthlyMortgage = loanAmount / numberOfPayments;
} else {
monthlyMortgage = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1);
}
}
// Vacancy Loss Calculation
var vacancyCost = monthlyRent * (vacancyRate / 100);
// Total Monthly Expenses
var totalMonthlyExpenses = monthlyMortgage + propertyTax + insurance + hoaFees + maintenance + vacancyCost;
// Net Operating Income (NOI) Monthly = (Rent – Vacancy) – (Operating Expenses excluding Mortgage)
// Operating Expenses = Tax + Insurance + HOA + Maintenance
var operatingExpenses = propertyTax + insurance + hoaFees + maintenance;
var monthlyNOI = (monthlyRent – vacancyCost) – operatingExpenses;
// Monthly Cash Flow
var monthlyCashFlow = (monthlyRent – vacancyCost) – totalMonthlyExpenses;
// Logic check: This is essentially Monthly NOI – Mortgage.
// Annual Cash Flow
var annualCashFlow = monthlyCashFlow * 12;
// Total Cash Invested
var totalCashInvested = downPayment + closingCosts;
// Cash on Cash ROI
var roi = 0;
if (totalCashInvested > 0) {
roi = (annualCashFlow / totalCashInvested) * 100;
}
// 4. Update UI
// Helper for currency formatting
function formatMoney(num) {
return "$" + num.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
}
document.getElementById('res-cashInvested').innerText = formatMoney(totalCashInvested);
document.getElementById('res-mortgage').innerText = formatMoney(monthlyMortgage);
document.getElementById('res-expenses').innerText = formatMoney(totalMonthlyExpenses);
document.getElementById('res-noi').innerText = formatMoney(monthlyNOI);
var cashFlowEl = document.getElementById('res-cashflow');
cashFlowEl.innerText = formatMoney(monthlyCashFlow);
if(monthlyCashFlow < 0) {
cashFlowEl.classList.add('negative-flow');
} else {
cashFlowEl.classList.remove('negative-flow');
}
var roiEl = document.getElementById('res-roi');
roiEl.innerText = roi.toFixed(2) + "%";
if(roi < 0) {
roiEl.classList.add('negative-flow');
} else {
roiEl.classList.remove('negative-flow');
}
document.getElementById('results-area').style.display = 'grid';
}