Rental Cash Flow Calculator

How to read this result

The headline is monthly cash flow: what is left after vacancy, operating expenses, the mortgage payment and a capital reserve. With the default inputs — a $215,000 property renting for $2,050 a month with 25% down at 7.5% — that is $131 a month, or $1,566 a year.

The waterfall under the number is the important part. Each bar starts where the previous one ended, so you can see the rent being consumed line by line until only the final bar is left. The toggle above the chart switches every figure between annual and monthly; the percentages do not change, only the period.

Rent is not cash flow

The most common mistake in rental analysis is treating scheduled rent as income. Gross potential rent is the starting point, not the answer. Between $2,050 of monthly rent and the $131 that reaches the owner, four separate things happen:

• Some months the unit is empty or the rent is not collected — the vacancy allowance.
• Management, maintenance, insurance and property tax are paid whether or not the unit is occupied.
• The mortgage payment is due every month, including the principal portion.
• A capital reserve is set aside for the roof, the HVAC and everything else that wears out.

The waterfall applies those deductions in that order because each one is calculated on a different base. Vacancy is a percentage of gross rent; management, maintenance and capex are percentages of gross potential rent, not of collected rent; debt service is fixed by the loan. Applying a percentage to the wrong base is how two calculators end up with different answers from identical inputs.

The default deal, line by line

Here is the same information as a table, with each line expressed as a share of gross potential rent so the proportions are visible.

The operating expenses deserve their own view, because the total hides the shape of the cost structure:

Property tax is the single largest line in this example, and it is also the line most likely to change after a sale, when the assessor resets the value. Insurance has been repricing quickly in many US markets. Neither is a percentage of rent, which is why this calculator asks for both as annual dollar amounts.

How a rent change flows through the model

Four of the deductions are percentages of gross rent, so a rent increase does not pass through to cash flow dollar for dollar. On this property, $100 more rent a month adds $1,200 to gross potential rent, but the percentage lines take their share first:

Twenty-four cents of every extra rent dollar goes to vacancy, management, maintenance and reserves before it reaches cash flow. The same arithmetic runs in reverse: a $100 rent cut removes about $76 of monthly cash flow, so at $131 a month this deal would be at zero after a rent reduction of roughly $172. That is the sense in which a thin cash flow is thin — the margin is not just small, it is small relative to the rent that supports it.

The capex reserve deserves separate attention because it is the line most often left out of other calculators. Here it is $1,230 a year, which is 78% of the $1,566 of cash flow. Remove the reserve and cash flow more than doubles to $2,796. The building did not change; only the decision to fund replacements did.

Monthly and annual cash flow tell different stories

$131 a month sounds manageable until something breaks. An annual figure of $1,566 looks like a cushion until the roof is quoted. Both numbers are true, and the reason to show them side by side is that a property can pass an annual test and still strain a monthly budget.

The gap also matters for lending. A lender computes the mortgage payment on the full loan amount, but a landlord experiences it as a fixed monthly obligation that arrives whether or not the unit is occupied. A property with 11 months of collected rent and a full year of payments is exactly the situation the vacancy line is meant to model.

Break-even occupancy is the real stress test

Break-even occupancy is the occupancy at which rent exactly covers operating expenses and debt service. On this deal it is 83.63%. At the 95% occupancy implied by a 5% vacancy allowance, the property clears its break-even point with about eleven points to spare. If vacancy ran at 20% — a bad year in a soft market — occupancy would fall below that line and cash flow would turn negative.

The break-even figure is useful because it does not depend on your view of the market. It is a property-level fact given the expenses and the loan: occupancy above it generates cash, below it consumes cash. Strip the loan out and the same property breaks even on its expenses alone at a much lower occupancy — which is the comparison the cap rate calculator is built around.

Two DSCR numbers, on purpose

Debt service coverage ratio divides NOI by annual debt service. On the default deal that is 1.21. The stress DSCR subtracts the capex reserve from NOI first and produces 1.12. The difference is the $1,230 reserve.

The lender-basis figure is the one that matters in underwriting, and many DSCR loan programmes quote a 1.20–1.25 minimum. The stress figure matters to the owner, because a property that only just covers its mortgage before reserves has no room for the building itself. Both are shown so you can see how much of the coverage comes from the reserve assumption.

What cash flow does not include

Cash flow is a one-year, cash-in-hand measure. It does not include principal paid down, which builds equity, or any change in the property’s value. It does not model income tax or depreciation. It does not know that the water heater will fail in February rather than evenly across twelve months.

Those exclusions are deliberate rather than holes: they keep the metric comparable across deals. If you want the return on the cash you invested instead of the cash left in the property, use the cash-on-cash return calculator, which takes the same inputs and divides by cash invested.

One more omission is worth naming: the model holds expenses constant. Property tax and insurance have been repricing quickly in many US markets, and both are outside the rent percentages, so neither rises automatically when rent does. A cash flow projection that assumes five years of flat expenses is usually assuming too much.