Calculating cash flow is the single most important step in analyzing a potential real estate investment. Positive cash flow ensures that your investment puts money in your pocket every month, rather than taking it out. This calculator helps investors break down income, expenses, and debt service to determine the true profitability of a rental property.
What is Cash Flow in Real Estate?
Cash flow is the remaining profit after all monthly expenses have been subtracted from your total rental income. The formula is simple:
Cash Flow = Gross Income – Total Expenses
However, getting the "Total Expenses" part right is where most new investors fail. It's not just the mortgage and taxes; you must account for vacancies, repairs, capital expenditures (CapEx), and property management fees.
Key Metrics Explained
Net Operating Income (NOI): This is your annual income minus operating expenses, excluding mortgage payments. It measures the property's potential profitability regardless of financing.
Cap Rate (Capitalization Rate): Calculated as NOI / Purchase Price. This metric helps you compare the return of different properties without considering the loan structure. A higher Cap Rate generally indicates a better return, but often comes with higher risk.
Cash on Cash Return (CoC): Calculated as Annual Cash Flow / Total Cash Invested. This measures the return on the actual money you put into the deal (down payment + closing costs). It is widely considered the most important metric for buy-and-hold investors.
Estimating Expenses Correctly
Underestimating expenses is the quickest way to turn a good deal into a bad one. Use these industry standards if you are unsure:
Vacancy Rate: 5-10% (depends on local market demand).
Maintenance & Repairs: 5-10% of rent for routine fixes.
CapEx: 5-10% of rent. This is saving for big ticket items like a new roof or HVAC system.
Property Management: 8-12% of rent if you hire a professional company.
How to Interpret the Results
If your Cash Flow is negative, the property is a liability unless it has massive appreciation potential. A "good" cash flow depends on your goals, but many investors aim for at least $100-$200 per door, per month.
For Cash on Cash Return, the stock market historically returns about 7-10% (adjusted for inflation). Real estate investors often target 8-12% or higher to justify the lack of liquidity and the effort involved in managing property.
function calculateCashFlow() {
// 1. Get Inputs
var purchasePrice = parseFloat(document.getElementById('purchasePrice').value) || 0;
var closingCosts = parseFloat(document.getElementById('closingCosts').value) || 0;
var downPaymentPercent = parseFloat(document.getElementById('downPaymentPercent').value) || 0;
var interestRate = parseFloat(document.getElementById('interestRate').value) || 0;
var loanTerm = parseFloat(document.getElementById('loanTerm').value) || 0;
var monthlyRent = parseFloat(document.getElementById('monthlyRent').value) || 0;
var otherIncome = parseFloat(document.getElementById('otherIncome').value) || 0;
var propertyTaxYearly = parseFloat(document.getElementById('propertyTax').value) || 0;
var insuranceYearly = parseFloat(document.getElementById('insurance').value) || 0;
var hoaMonthly = parseFloat(document.getElementById('hoa').value) || 0;
var vacancyRate = parseFloat(document.getElementById('vacancyRate').value) || 0;
var repairsRate = parseFloat(document.getElementById('repairsRate').value) || 0;
var capexRate = parseFloat(document.getElementById('capexRate').value) || 0;
var managementRate = parseFloat(document.getElementById('managementRate').value) || 0;
// 2. Calculate Initial Investment
var downPaymentAmount = purchasePrice * (downPaymentPercent / 100);
var loanAmount = purchasePrice – downPaymentAmount;
var totalCashInvested = downPaymentAmount + closingCosts;
// 3. Calculate Mortgage (Principal & Interest)
// Formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
var monthlyRate = (interestRate / 100) / 12;
var numberOfPayments = loanTerm * 12;
var mortgagePayment = 0;
if (interestRate > 0) {
mortgagePayment = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1);
} else {
mortgagePayment = loanAmount / numberOfPayments;
}
if (!isFinite(mortgagePayment)) mortgagePayment = 0;
// 4. Calculate Income
var totalMonthlyIncome = monthlyRent + otherIncome;
// 5. Calculate Operating Expenses (Variable based on rent)
var vacancyCost = totalMonthlyIncome * (vacancyRate / 100);
var repairsCost = totalMonthlyIncome * (repairsRate / 100);
var capexCost = totalMonthlyIncome * (capexRate / 100);
var managementCost = totalMonthlyIncome * (managementRate / 100);
// Fixed Monthly Expenses
var taxMonthly = propertyTaxYearly / 12;
var insuranceMonthly = insuranceYearly / 12;
var totalOperatingExpenses = taxMonthly + insuranceMonthly + hoaMonthly + vacancyCost + repairsCost + capexCost + managementCost;
// 6. Calculate Totals
var totalMonthlyExpenses = totalOperatingExpenses + mortgagePayment;
var monthlyCashFlow = totalMonthlyIncome – totalMonthlyExpenses;
var annualCashFlow = monthlyCashFlow * 12;
// 7. Calculate Returns
// NOI = Annual Income – Annual Operating Expenses (Excluding Mortgage)
var annualNOI = (totalMonthlyIncome * 12) – (totalOperatingExpenses * 12);
// Cap Rate = NOI / Purchase Price
var capRate = (purchasePrice > 0) ? (annualNOI / purchasePrice) * 100 : 0;
// CoC Return = Annual Cash Flow / Total Cash Invested
var cocReturn = (totalCashInvested > 0) ? (annualCashFlow / totalCashInvested) * 100 : 0;
// 8. Update UI
function formatMoney(amount) {
return '$' + amount.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
}
function formatPercent(amount) {
return amount.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2}) + '%';
}
document.getElementById('resIncome').innerText = formatMoney(totalMonthlyIncome);
document.getElementById('resMortgage').innerText = formatMoney(mortgagePayment);
document.getElementById('resOpExp').innerText = formatMoney(totalOperatingExpenses);
var cfElement = document.getElementById('resCashFlow');
cfElement.innerText = formatMoney(monthlyCashFlow);
if (monthlyCashFlow < 0) {
cfElement.classList.add('negative');
cfElement.classList.remove('highlight-result');
} else {
cfElement.classList.remove('negative');
cfElement.classList.add('highlight-result');
}
document.getElementById('resNOI').innerText = formatMoney(annualNOI);
document.getElementById('resCapRate').innerText = formatPercent(capRate);
document.getElementById('resCoC').innerText = formatPercent(cocReturn);
document.getElementById('resTotalInvested').innerText = formatMoney(totalCashInvested);
// Show results
document.getElementById('results').style.display = 'block';
}