How do you calculate monthly rental property cash flow?
Subtract vacancy losses, operating expenses, and loan principal-and-interest payments from expected rental income. Then subtract a separate allowance for major replacements if you want cash available after reserves. For the fictional budget below, $2,000 rent minus $100 vacancy, $650 operating expenses, $1,000 debt service, and $100 capital reserve leaves $150 per month before income taxes.
The Roof & Ratio rental deal analyzer helps organize the assumptions. The guide below explains how cash flow differs from NOI, cap rate, and cash-on-cash return.
For a closer look at the financing portion of your budget, use our free loan payment and amortization calculator. Keep property taxes, insurance, maintenance and reserves in your separate property budget.
The rent looks good. The mortgage payment looks manageable. But what is left after vacancy, insurance, taxes, repairs, and everything else?
A rental property cash flow calculation helps answer that question before you make an offer. Start with the property’s income and expenses, then account for financing and the money you want to reserve for future repairs.
How to calculate rental property cash flow
Monthly cash flow before capital reserves and income taxes = rent collected + other income − operating expenses − principal-and-interest payments.
When estimating future results, subtract a vacancy and collection-loss allowance from scheduled rent first. Use actual property quotes and records where available.
- Income: expected rent and any other reliable property income.
- Operating expenses: property taxes, insurance, routine repairs, management, HOA charges, and utilities you pay.
- Debt service: the loan’s principal-and-interest payments. Avoid counting tax and insurance escrow twice if you already included those costs above.
- Capital reserves: a separate allowance for major replacements, such as a roof or HVAC system.
A monthly cash flow example
Here is a fictional property budget. These figures are assumptions, not local market averages.
| Monthly item | Amount |
|---|---|
| Scheduled rent | $2,000 |
| Vacancy allowance | −$100 |
| Operating expenses | −$650 |
| Principal and interest | −$1,000 |
| Cash flow before capital reserve | $250 |
| Capital-replacement reserve | −$100 |
| Cash available after reserve, before income taxes | $150 |
That $150 is a planning estimate. A vacancy lasting longer than expected or a repair beyond the reserve can change the result quickly. Read how to plan rental property repair reserves.
What NOI and cap rate tell you
Net operating income (NOI) = effective rental income − operating expenses. For this example, monthly NOI is $2,000 − $100 − $650 = $1,250, or $15,000 annually. This definition excludes financing, income taxes, depreciation, and the separate capital-replacement reserve. Underwriting conventions can differ, so compare figures calculated on the same basis.
Cap rate = annual NOI ÷ purchase price × 100. At a hypothetical $200,000 purchase price, $15,000 in NOI gives a 7.5% cap rate. Cap rate describes the property’s income relative to its price before financing; it is not the cash return on your down payment.
How cash-on-cash return differs
Cash-on-cash return = annual before-tax cash flow ÷ total cash invested × 100. Suppose the down payment, closing costs, and initial repairs total $60,000. Annual cash flow before the separate reserve is $3,000, producing a 5.0% cash-on-cash return. After the $1,200 annual reserve allowance, the budget has $1,800 available, equivalent to 3.0% of the cash invested.
Label whether a return includes reserves so you do not compare unlike numbers. Neither figure includes appreciation, sale proceeds, or your eventual tax outcome.
Use the rental property cash flow calculator
The Roof & Ratio Rental Property Cash Flow Calculator & Deal Analyzer brings rental cash flow, NOI, cap rate, cash-on-cash return, and financing assumptions into one downloadable tool. It also includes a flip-analysis mode.
- Gather the asking price, expected rent, expense estimates, financing terms, and upfront cash requirements.
- Select rental analysis and enter your assumptions in the corresponding fields.
- Review the results and rerun the deal with lower rent or higher expenses.
- Account for any reserve or cost not included in your chosen inputs, then print or save the analysis.
The tool opens in a modern web browser on your phone, tablet, or computer. It is an interactive HTML download; spreadsheet software is not required. View the illustrated product walkthrough.
Before relying on the result
Verify the rent with comparable properties, obtain property-specific insurance estimates, review likely taxes, and check the repair needs. Include management even if you intend to handle the work yourself, so you can see what hiring help would do to the budget.
For a closer look at principal and interest, see our mortgage amortization and extra-payment guide. Explore the full Investor Tools collection when you need additional planning resources.
By Marchelle Cook. Educational planning information only; not financial, tax, legal, or lending advice. Calculations are fictional examples, not promised investment returns.
Common rental cash flow questions
Is mortgage principal an operating expense?
Not in the NOI definition used here. Principal and interest are deducted afterward as debt service when estimating cash flow. Mixing the two steps can make cap-rate comparisons misleading.
Should I count property taxes twice if they are escrowed?
No. When taxes and insurance are already included in your operating expenses, use principal and interest for the debt-service line so the same costs are not deducted again.
Does a positive result guarantee a good investment?
No. This is a scenario based on your inputs. Vacancy, unexpected repairs, collection losses, financing changes, and sale costs can alter the outcome. Rerun the budget with less favorable assumptions.