Turn the rent estimate into a realistic income picture. Account for vacancy, everyday expenses, reserves, and the mortgage before deciding whether a rental supports your goals.
At $2,400 rent with 5% vacancy, effective monthly income is $2,280. Taxes of $250, insurance of $100, other costs of $100, 8% management, and 5% each for maintenance and capital reserves leave $1,398 before debt. A $180,000 loan at 7% over 30 years costs about $1,197.54, leaving about $200.46 monthly cash flow.
Build a rental budget from income downward
Enter the purchase price, repairs needed before occupancy, and closing costs. Use achievable rent for a comparable unit, not the highest nearby asking rent. Vacancy reduces scheduled rent; other income is entered separately. Property taxes, insurance, HOA charges, utilities, and management belong in the operating budget. Maintenance and capital reserves protect cash for turnover, repairs, and larger replacements. The percentage allowances here are applied to scheduled gross rent.
Read cash flow, cap rate, and cash-on-cash together
Cash flow is what remains after reserves and the mortgage payment. Cap rate compares annual net operating income with purchase price and excludes debt service and the capital reserve. Cash-on-cash compares annual cash flow with the down payment, initial repairs, and closing costs. A property can have an attractive cap rate but weak cash flow if the financing is expensive. Debt coverage compares operating income with principal and interest; lender definitions and qualifying rules may differ.
Understand what an estimate leaves out
This is a stabilized annual snapshot, not a full multiyear forecast. It does not assume rent growth, appreciation, tax savings, depreciation, or a later sale. If your loan requires mortgage insurance, add that recurring charge to the other monthly costs. Avoid entering taxes and insurance twice when your lender escrows them: the loan payment shown here is principal and interest only. Verify expenses against leases, bills, and the actual property condition.
No. Appreciation changes estimated asset value and cannot pay this month’s bills. This calculator keeps it separate from rental operating cash flow.
Why are cap rate and cash-on-cash different?
Cap rate ignores your loan and compares operating income with property price. Cash-on-cash includes debt service and compares cash flow with the cash you put into the purchase.
Are the mortgage payments taxes and insurance included?
The calculated payment is principal and interest only. Enter property taxes and insurance in the operating expenses, even if the lender collects them through escrow.
