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Rental deal math
Rental cash flow calculator: what is left after every bill
Cash flow is the money left after the property pays for itself and its loan. Positive cash flow means the rent covers everything; negative means you top it up.
The formula
Cash flow = rent - vacancy - operating expenses - loan paymentWorked example
- Purchase price $250,000, 25% down, 30-year loan at 6.5%: loan $187,500, payment (principal and interest) $1,185 a month, or $14,222 a year.
- Gross rent $2,300 x 12 = $27,600. Less vacancy $1,380, taxes $3,000, insurance $1,400, maintenance $2,208, management $2,208.
- Net operating income = $17,404. Cash flow = $17,404 - $14,222 = $3,182 a year ($265 a month).
Illustrative inputs for learning, not market data or a forecast. Replace every number with figures from your own deal.
How to use it
Work in annual numbers first, then divide by 12 for the monthly view. Property taxes and insurance are often paid in lumps, so a monthly figure can hide a bad month. Keep a reserve for large repairs separate from the maintenance allowance.
Frequently asked questions
What is a good monthly cash flow?
There is no universal number. Compare cash flow with the cash you invested (cash-on-cash return) and with your risk tolerance, not with a flat dollar target.
Does principal paydown count as cash flow?
No. Principal reduces your loan balance and builds equity, but it leaves your bank account, so cash flow subtracts the full payment.
Are capital expenditures part of operating expenses?
Many investors budget them separately as a reserve. Either way, include some allowance so large replacements do not surprise you.