Rental Property Cash Flow Calculator

Estimate only, not investment, tax, or lending advice. Every percent in the form is a number you typed or a placeholder that shipped with the page. The 7 percent rate, 20 percent down payment, 8 percent management, and 5 percent reserve lines are not a quote and not a market survey. Property tax comes from the bill. The interest rate comes from a lender. Rental tax treatment is in IRS Publication 527, not in this form.

How the cash-flow lines are calculated

Down payment is a percent of the purchase price. Loan amount = price − price × down percent ÷ 100. Principal and interest use the fixed-rate mortgage formula. Let r be the annual rate divided by 12 and then by 100, and let n be the term in years times 12. Payment = loan × (r × (1 + r)^n) ÷ ((1 + r)^n − 1). A zero rate makes the payment the loan divided by the number of months. A loan of $240,000 at 0 percent for 15 years is 240,000 ÷ 180, which displays as $1,333. A zero loan, which is what a 100 percent down payment produces, has a payment of $0 even if the rate box still says 7.

Property tax and insurance are annual dollars divided by 12. HOA is a monthly dollar amount. A blank HOA is treated as zero. Property management, vacancy, maintenance, and capital reserves are each a percent of the gross monthly rent you typed, and all four are applied. They are not taken off one after another. Eight plus five plus five plus five is 23 percent of the rent on the line, not 23 percent of rent after vacancy. Monthly operating cost = tax ÷ 12 + insurance ÷ 12 + HOA + rent × (management + vacancy + maintenance + reserves) ÷ 100. Total monthly expenses = mortgage payment + that operating cost. Monthly cash flow = rent − total monthly expenses. Annual cash flow = that unrounded monthly cash flow × 12.

Cash-on-cash return = annual cash flow ÷ cash invested × 100. Cash invested is the down payment plus closing costs, and closing costs are hard-coded as 3 percent of the purchase price. There is no field for them. The 3 percent is not a Closing Disclosure and it does not change if you pay cash. Cap rate = annual net operating income ÷ purchase price × 100. Net operating income is (rent − operating cost) × 12. The mortgage is left out of the cap rate and included in cash flow. The 1 percent check is a comparison, not a second formula: the line passes when monthly rent is at least purchase price × 0.01. Dollar figures round to the nearest dollar on each line separately. The two percentages use two decimal places.

Worked examples

Example 1: The numbers in the form's sample

Price $250,000, down payment 20 percent, rate 7 percent, term 30 years, rent $2,500, tax $3,500 a year, insurance $1,500 a year, HOA $0, management 8 percent, vacancy 5 percent, maintenance 5 percent, reserves 5 percent. Down payment = $50,000. Loan = $200,000. Principal and interest displays as $1,331. Tax per month is 3,500 ÷ 12. Insurance is $125. The four rent percents are $200, $125, $125, and $125, together $575, which is 23 percent of $2,500. Total monthly expenses display as $2,322. Cash flow displays as $178 a month, and annual cash flow as $2,133. Closing costs inside the formula are 250,000 × 0.03 = $7,500, so cash invested is $57,500. Cash-on-cash displays as 3.71 percent. Cap rate displays as 7.24 percent. Rent equals 1 percent of the price, so the 1 percent line passes. Dividing the rounded $178 by something else will not reproduce 3.71 percent. The percentage uses the unrounded monthly result times 12, then divides by $57,500.

Example 2: Less rent, an HOA, self-managed

Same price, rate, term, tax, and insurance. Change the down payment to 25 percent, rent to $1,800, HOA to $150 a month, management to 0, and vacancy to 8 percent. Leave maintenance and reserves at 5 percent. Loan = $187,500. Principal and interest displays as $1,247. Cash flow displays as −$338 a month, annual cash flow as −$4,057. Cash invested is the $62,500 down payment plus the same hard-coded $7,500, and cash-on-cash displays as −5.80 percent. Cap rate displays as 4.36 percent. The 1 percent line fails and says the rent would need to be $2,500 a month to pass. Negative cash flow here is rent minus the loan and the operating lines. It is not a prediction of appreciation.

Example 3: Cash purchase, and why the 1 percent line can disagree

Price $200,000, down payment 100 percent, rent $1,600, tax $2,400, insurance $900, HOA $0, management 0, vacancy 5, maintenance 5, reserves 5. The rate box does not matter: the loan is $0 and the mortgage line is $0. Operating cost is $515 and cash flow displays as $1,085 a month, $13,020 a year. Cash invested is still the full price plus 3 percent, $206,000, and cash-on-cash displays as 6.32 percent. Cap rate displays as 6.51 percent. The 1 percent line fails, because $1,600 is under the $2,000 it asks for. Passing that line and having cash left after the mortgage are different tests. This example fails one and clears the other because there is no loan.

When to use this

Use it when a listing has a price and a rent, and you want to see whether that rent covers a specific loan plus the operating items you are willing to type. It is the right scratch pad before an offer and the right stress test when you already own the house and the tax bill or the insurance renewal changed. It is the wrong tool for "what is the payment on the house I will live in." That question is principal, interest, tax, and insurance on the Mortgage Payment Calculator, which also has a PMI switch this rental page does not. How the interest share of a payment moves over the years is in How Mortgage Amortization Actually Works. This page shows one monthly payment, held constant.

The 1 percent comparison is explained as a screening habit, including where it stops being informative, in The 1 Percent Rule for Rental Property. The calculator does not import anything from that article. It compares rent with 1 percent of the price you typed.

What the 3 percent and the reserve boxes are

Closing costs in the cash-on-cash denominator are always 3 percent of the purchase price. They are not 3 percent of the loan, they are not points, and they are not a figure you can edit. A cash buyer still gets that 3 percent added to cash invested, which pulls the cash-on-cash percentage down compared with dividing by the price alone. If your Loan Estimate shows a different cash-to-close, this page cannot store it. Treat 3.71 percent in example 1 as the result of this formula, then recompute the percentage by hand with your own cash-to-close if the disclosure disagrees.

The reserve percents do not create a savings account. They subtract dollars from cash flow so the monthly number is not "rent minus the mortgage." A 5 percent vacancy line on $2,500 rent is $125 every month, which over a year is 5 percent of annual rent, the same dollars as about 18 days of that rent. That is arithmetic from the percent you typed. It is not a vacancy study. If you self-manage, set management to 0. The 8 in the box is the placeholder that appears on load, the same way 7 percent is the placeholder rate. Replace both.

Common mistakes

• Reading the sample under the form as a target return. Example 1 produces $178 a month and 3.71 percent cash-on-cash, not a round $200 and not 5 percent. Those placeholders are just the inputs.
• Typing the down payment in dollars. 50000 in the down-payment box is 50,000 percent, not $50,000. Twenty percent is 20.
• Applying the reserve percents to rent after vacancy. Management, vacancy, maintenance, and reserves each multiply the gross rent. They stack.
• Putting the annual tax into the HOA box. Tax and insurance are annual and get divided by 12. HOA is already monthly and is not divided.
• Treating a passing 1 percent line as cash flow. Example 3 fails the 1 percent line and still shows positive cash flow, because the test ignores the loan and the operating costs.
• Expecting depreciation or principal paydown in the cash-on-cash figure. Cash-on-cash is annual cash flow divided by down payment plus the hard-coded 3 percent. It does not add equity or appreciation.
• Leaving 7 percent in the rate box. Seven is not today's rate. The payment moves with the rate you type. Get the rate from the lender.

Limitations

One fixed rate, one rent, no rent growth, no expense inflation, no extra principal payments, no mortgage insurance, no closing costs other than the locked 3 percent of price, and no tax. Depreciation, deductible interest, and the way rental income is reported are IRS Publication 527 questions, and they change. This page does not estimate them. It also does not know your holding period, your vacancy in a particular city, or what a property manager in that city charges. Cap rate uses the purchase price you typed as the value. It is not an appraisal. Dollar lines can disagree with a penny-perfect amortization schedule by about a dollar because each line rounds on its own.

FAQ

What does the $250,000 sample actually produce?

With 20 percent down, 7 percent, 30 years, $2,500 rent, $3,500 tax, $1,500 insurance, no HOA, and 8, 5, 5, and 5 percent on the four rent lines, monthly cash flow displays as $178, annual cash flow as $2,133, cash-on-cash as 3.71 percent, and cap rate as 7.24 percent. The 1 percent line passes.

Why doesn't cash-on-cash match $178 times 12 divided by the down payment?

Annual cash flow is the unrounded monthly cash flow times 12, then rounded for display. Cash invested is the down payment plus 3 percent of the price, not the down payment alone. In example 1 that denominator is $57,500.

If the 1 percent line passes, does the property cash-flow?

Not from that line. The check only asks whether rent is at least 1 percent of the price. Example 3 fails it and still shows $1,085 a month left, because the loan is zero. A high rate or a high tax bill can do the opposite.

Can I change the 3 percent closing cost?

No. The page always adds 3 percent of the purchase price to the down payment before it divides. Use your Closing Disclosure if you need a different cash-to-close, and treat this percentage as the formula's result.

Are the reserve percents taken out of rent one after another?

No. Management, vacancy, maintenance, and capital reserves each multiply the gross monthly rent, and the four results are added. Vacancy does not shrink the rent before the other three percents run.

Does this include depreciation, deductible interest, or appreciation?

No. Cash flow is rent minus the mortgage and the operating lines you typed. Tax treatment of a rental is covered in IRS Publication 527 and depends on your return. This form does not compute a deduction or a future sale price.

Where do the 7 percent rate and the 8 percent management figure come from?

They are placeholders filled in so the form is not empty. They are not a survey and not a quote. Replace the rate with the lender's rate and the management percent with what you will actually pay, including zero if you manage it yourself.

Related calculators

• Mortgage Payment Calculator for the payment on a house you will live in, including PMI
• The 1 Percent Rule for Rental Property
• How Mortgage Amortization Actually Works
• Auto Loan Calculator for a different loan with the same style of payment formula