Rental cash flow calculator
One month of rental income against every cost that comes out of it, including the two reserves most spreadsheets quietly leave out.
One month, honestly
Cash flow is what is left after everything, not rent minus mortgage. The difference between those two figures is where most disappointing rentals come from.
rent 2400 | + | 2,400 |
parking 75 | + | 75 |
mortgage -1180 | − | 1,180 |
property tax -310 | − | 310 |
insurance -95 | − | 95 |
management -180 | − | 180 |
repairs fund -120 | − | 120 |
vacancy reserve -120 | − | 120 |
| Total | 470 |
Rent minus mortgage is 1,220. Actual cash flow is 470. Both numbers are true; only one of them is the one you can spend.
The two lines people leave out
Repairs. A boiler lasts fifteen years and then costs 2,500 in one afternoon. A common allowance is five to ten per cent of rent, or one to two per cent of the property value a year, whichever you find easier to defend. Older properties sit at the top of that range.
Vacancy. No property is let 100 per cent of the time. Between tenancies you are paying the mortgage with no rent coming in. Five per cent of rent is roughly two and a half weeks of empty a year, which is optimistic in most markets and reasonable in a strong one.
Both are averages of costs that arrive unevenly. They will not match any individual month, and that is the point. They stop a good year being mistaken for a good investment.
Annual, and cash-on-cash return
Multiply the monthly figure up, then compare it against what you actually put in:
annual cash flow 5640 | + | 5,640 |
cash invested: 62000 | = | 62,000 |
cash on cash: annual cash flow / cash invested * 100 | = | 9.10 |
| Total | 5,640 |
A 9.1 per cent cash-on-cash return. A sheet that mixes money with plain counts or ratios will put a currency symbol on all of them. Set the selector above the results to none when that bothers you. It is display only and changes nothing in the arithmetic.
Cash invested means everything you actually parted with: deposit, stamp duty or transfer tax, legal fees, survey, and any work done before the first tenant moved in. Using only the deposit inflates the return and is the most common way these numbers get flattered.
What a good number looks like
It depends entirely on the market and on what else you could do with the money. As a rough orientation, a single-let property producing under 100 a month of true cash flow has very little margin for a bad year, and a cash-on-cash return below the yield on a savings account is worth questioning hard given the work involved.
Cash flow is also only one of the four ways a rental pays. The others are mortgage paydown, appreciation and tax treatment. A property can be a sound long-term hold on thin cash flow. It just cannot be a sound one on negative cash flow that you have not deliberately chosen.
Run your own numbers →Questions
What should I budget for repairs on a rental property?
A common allowance is five to ten per cent of rent, or one to two per cent of the property value a year. Older properties sit at the top of that range. It is an average of costs that arrive unevenly, so it will never match any single month.
What vacancy rate should I assume?
Five per cent of rent is roughly two and a half weeks empty a year, which is optimistic in most markets and reasonable in a strong one. Check local letting times rather than using a default.
Is cash flow just rent minus the mortgage?
No, and treating it that way is the most common reason a rental disappoints. Property tax, insurance, management, repairs and vacancy all come out too. In the example on this page the two figures are 1,220 and 470.
How do I calculate cash-on-cash return?
Divide annual cash flow by the total cash you actually put in (deposit, transfer taxes, legal fees, survey and any pre-letting works) then multiply by 100. Using only the deposit inflates the figure.
Is this financial advice?
No. It is a scratchpad that does arithmetic on figures you type. Check anything that matters with professionals licensed where you are before acting on it.