Real estate & rental
Real Estate Rental Property Calculator
Works a rental property's performance, where the monthly cash position is the live question.
Result
Maintenance, capital reserves and management are included as percentages of rent because leaving them out is the most common error in rental analysis. A property that only cash flows when those are set to zero does not cash flow. Not investment advice.
Get a Free Business AuditHow the calculation works
Rental income less vacancy, less operating expenses, less debt service, giving monthly and annual cash flow, with the return on cash invested. The monthly figure is the one that matters day to day, because that is the number that determines whether the property funds itself or needs feeding.
What moves the number
- Vacancy allowance, which is frequently omitted.
- Operating expenses including management and reserves.
- Debt service at the actual rate and term.
- Rent against the market, including whether it is below.
Where this one goes wrong
A projection built on full occupancy and no reserve shows positive cash flow on properties that do not have it, and those two omissions together account for most of the optimistic rental analyses in circulation. Include both. Rent below market is the other thing worth noting, since a property acquired with a sitting tenant at below-market rent performs worse than the market figures suggest until the tenancy turns over.
Before you quote
- Include a vacancy allowance and a capital reserve.
- Use the actual current rent, not market rent, for an occupied unit.
- Check the monthly figure, not only the annual one.
Questions
About this calculator
Why do rental projections overstate cash flow?
Usually two omissions: no vacancy allowance and no capital reserve. Together they account for most optimistic analyses, and adding both frequently turns an apparently positive property into a marginal one.
Should I project at market rent or current rent?
Current rent for an occupied unit, since that is what the property produces until the tenancy turns over. Projecting at market rent assumes a turnover that carries its own vacancy and costs, and those belong in the model too.
Why does the monthly figure matter more than the annual?
Because that is when the bills arrive. An annual figure can be positive while several months are negative, particularly when tax instalments and insurance renewals land, and those months are when a property without reserves becomes a problem.
The formula
cash flow = NOI - annual debt service, where NOI is effective rent less all operating expenses
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How to use this calculator
- Purchase price ($). Enter your own figure; the page starts at $385,000.
- Down payment (%). Enter your own figure; the page starts at 25%.
- Mortgage rate (%). Enter your own figure; the page starts at 7%.
- Term (years). Enter your own figure; the page starts at 30.
- Monthly rent ($). Enter your own figure; the page starts at $3,200.
- Vacancy (%). Enter your own figure; the page starts at 7%.
The result updates as you type, so you can try a figure, see what it does to monthly cash flow, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Purchase price | $385,000 |
| Down payment | 25% |
| Mortgage rate | 7% |
| Term (years) | 30 |
| Monthly rent | $3,200 |
| Vacancy | 7% |
| Property taxes per year | $4,800 |
| Insurance per year | $1,600 |
| Maintenance as a share of rent | 8% |
| Capital reserves as a share of rent | 6% |
| Management as a share of rent | 8% |
What comes out
| Result | Value |
|---|---|
| Monthly cash flow main result | -$182.39 |
| Net operating income | $20,864 |
| Monthly mortgage | $1,921.06 |
| Cap rate | 5.42% |
| Cash on cash return | -2.27% |
| Rent as a share of price | 0.83% |
The property runs at -$182.39 a month. The cap rate of 5.42% is below the mortgage rate, which is why leverage is working against it here.
How sensitive the answer is
Holding everything else steady and changing only purchase price, this is what happens to monthly cash flow. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Purchase price ($) | Monthly cash flow |
|---|---|
| $192,500 | $778.14 |
| $288,750 | $297.87 |
| $385,000 example above | -$182.39 |
| $577,500 | -$1,142.92 |
| $770,000 | -$2,103.46 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Purchase price ($)
- A money amount, starting at $385,000.
- Down payment (%)
- A percentage, between 0 and 100, starting at 25%.
- Mortgage rate (%)
- A percentage, between 0 and 20, starting at 7%.
- Term (years)
- A number, between 0 and 50, starting at 30.
- Monthly rent ($)
- A money amount, starting at $3,200.
- Vacancy (%)
- A percentage, between 0 and 50, starting at 7%.
- Property taxes per year ($)
- A money amount, starting at $4,800.
- Insurance per year ($)
- A money amount, starting at $1,600.
- Maintenance as a share of rent (%)
- A percentage, between 0 and 30, starting at 8%.
- Capital reserves as a share of rent (%)
- A percentage, between 0 and 30, starting at 6%.
- Management as a share of rent (%)
- A percentage, between 0 and 25, starting at 8%.
What the results tell you
| Result | What it is |
|---|---|
| Monthly cash flow | The headline result. A money figure. |
| Net operating income | A money figure. |
| Monthly mortgage | A money figure. |
| Cap rate | A percentage. |
| Cash on cash return | A percentage. |
| Rent as a share of price | A percentage. |
What is not in this number
Property figures here exclude the costs that decide whether a deal works: vacancy, maintenance, management, capital expenditure and the transaction costs at both ends. A return that looks strong before those frequently does not survive them.
Keep going
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