Transparent method
The formula
Worked example
Example inputs
How to interpret the result
Cash flow that looks comfortable under typical assumptions can turn negative once a vacancy stretch, an unexpected repair, or a financing change gets stress-tested against it, because a single steady-state calculation doesn't reveal how much margin actually exists before the numbers turn against the owner.
Before you rely on it
What to check
Stress-test the cash flow calculation against a vacancy period and an unexpected repair cost, not just the steady-state assumptions used for the base case.
The common error
Where people go wrong with rental cash flow calculator
Evaluating a rental property's cash flow only under ideal, steady-state assumptions. A single vacancy stretch or unplanned repair can turn a comfortable-looking number negative, and the base case alone doesn't reveal how much margin actually exists.
Sensitivity evidence
How monthly scheduled rent changes the estimated monthly cash flow
| Monthly scheduled rent | Estimated monthly cash flow | Annual cash flow |
|---|---|---|
| $3,200 | -$260 | -$3,120 |
| $3,600 | $120 | $1,440 |
| $4,000worked example | $500 | $6,000 |
| $4,400 | $880 | $10,560 |
| $4,800 | $1,260 | $15,120 |
Every input, tested
Which input moves the estimated monthly cash flow most
| Input | Tested from | To | Estimated monthly cash flow at each end | Swing |
|---|---|---|---|---|
| Monthly scheduled rent | $3,600 | $4,400 | $120 to $880 | $760 (152%) |
| Monthly mortgage payment | $1,890 | $2,310 | $710 to $290 | $420 (84%) |
| Monthly operating expenses | $1,080 | $1,320 | $620 to $380 | $240 (48%) |
| Vacancy allowance | 4.0% | 6.0% | $540 to $460 | $80 (16%) |
Two variables at once
Estimated monthly cash flow by monthly scheduled rent and vacancy allowance
| Monthly scheduled rent \ Vacancy allowance | 3.0% | 5.0% | 7.0% |
|---|---|---|---|
| $3,200 | -$196 | -$260 | -$324 |
| $3,600 | $192 | $120 | $48 |
| $4,000 | $580 | $500 | $420 |
| $4,400 | $968 | $880 | $792 |
| $4,800 | $1,356 | $1,260 | $1,164 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Monthly scheduled rent | $4,000 |
| Vacancy allowance | 5.0% |
| Monthly operating expenses | $1,200 |
| Monthly mortgage payment | $2,100 |
| Estimated monthly cash flow | $500 |
| Annual cash flow | $6,000 |
Where the inputs come from
Monthly scheduled rent is the rent if every unit were occupied and paid, vacancy allowance is the share you expect to lose, monthly operating expenses cover taxes, insurance, repairs, management, utilities and reserves, and the monthly mortgage payment is principal and interest. Use realistic expense figures: many first-time owners forget capital reserves for roofs, appliances and turnover. A common rule of thumb sets aside 5% to 10% of rent for repairs and another 5% for capital items.
Using the estimated monthly cash flow in a real decision
Negative cash flow needs a plan.
When the result stops applying
The numbers assume steady rent and costs, but rents, taxes, insurance and maintenance change, and big repairs arrive irregularly. Tax effects, including depreciation and interest deductions, change after-tax cash flow. Variable-rate loans change the payment. The figure does not include the value of principal paydown or appreciation.
What to compare it with
Measure the return on your cash with the cash-on-cash calculator, the property's yield with the cap rate page, and coverage with the DSCR calculator. The vacancy loss and property management fee pages refine two of the inputs. The break-even occupancy calculator shows how much vacancy you can survive.
People also ask
Frequently asked questions
How much should I set aside for repairs and vacancy?
A common planning range is 5% to 10% of rent for maintenance, 5% to 8% for vacancy and about 5% for capital expenses, adjusted for the age and condition of the property.
Is positive cash flow enough to make a rental good?
Not by itself. Consider the return on the cash you invested, the risks, and the effort. Thin cash flow can turn negative with one repair or vacancy.
Should cash flow include principal payments?
Cash flow subtracts the whole mortgage payment, including principal, even though principal builds equity, so total return adds principal paydown back.