Rental Property Calculator
With purchase price 320000 usd, down payment 25 percent, mortgage rate 6.5 percent, mortgage term 30 years and 8 more fields, rental property comes to -$48.96 — cash flow a month. It is reached in 22 steps, the last of which is -587.55908 / 12, and each one is printed on the page with its numbers filled in. The formula is the one published by Federal Reserve Bank of St. Louis (FRED), not an approximation fitted to it.
Cap rate, cash flow and cash-on-cash return on a rental, counting the three costs that turn a positive spreadsheet negative.
Formula and sources checked · How we check
Purchase price 320000, Down payment 25, Mortgage rate 6.5, Mortgage term 30 years
-$48.96
Cash flow a month for the example below. Editing a field recomputes the calculator below; this figure holds the answer the page was loaded with.
It is written into the HTML rather than drawn by a script, so a search engine reading this page without running JavaScript still finds an answer.
- Gross rent a year
2400 * 1228,800 usd- Lost to vacancy
28800 * 8 / 1002,304 usd- Rent actually collected
28800 - 230426,496 usd- Maintenance and capital
28800 * 10 / 1002,880 usd- Management
26496 * 0 / 1000 usd- Operating costs a year
4200 + 1800 + 0 * 12 + 2880 + 08,880 usd- Net operating income
26496 - 888017,616 usd- Cap rate
17616 / 320000 * 1005.505 %- Down payment
320000 * 25 / 10080,000 usd- Amount borrowed
320000 - 80000240,000 usd- Monthly rate
6.5 / 100 / 120.005- Payments
30 * 12360- Mortgage payment a month
(240000 * 0.0054167 / (1 - pow(1 + 0.0054167, -360)))1,516.963 usd- Mortgage a year
1516.9633 * 1218,203.559 usd- Cash flow a year
17616 - 18203.559-587.559 usd- Cash flow a month
-587.55908 / 12-48.963 usd- Cash actually put in
80000 + 900089,000 usd- Cash-on-cash return
-587.55908 / 89000 * 100-0.66 %- Debt service coverage
17616 / 18203.5590.968- Rent as a share of price
2400 / 320000 * 1000.75 %- Cash flow if you ignore vacancy, maintenance and management
(28800 - 4200 - 1800 - 0 * 12 - 18203.559) / 12383.037 usd- What those three allowances cost a month
383.03674 - -48.963256432 usd
Worked example
A $320,000 rental at $2,400 a month, bought with 25% down at 6.5%, has a 5.50% cap rate and loses $48.96 a month. Take out the vacancy, maintenance and management allowances — as a listing or a broker spreadsheet usually does — and the same property makes $383.04. Those three lines are worth $432 a month, and they are the difference between a deal that works and one that does not. The debt service coverage is 0.97, so the building does not quite cover its own loan.
How to work it out yourself
- 1.Enter the purchase price, the down payment and the rate you can actually get on an investment loan — they run above owner-occupied rates.
- 2.Put in the rent the property will really let for, not the asking rent.
- 3.Leave the vacancy and maintenance allowances alone unless you have your own numbers. Setting them to zero is what makes a bad deal look good.
- 4.Read the cap rate to compare buildings and the cash-on-cash to compare this against anything else you could do with the cash.
Cash flow and cash-on-cash by rent, on this purchase
| Rent a month (usd) | Cash flow a month | Cash flow a month | Cash-on-cash return | Cap rate |
|---|---|---|---|---|
| 1800 | -$540.96 | -540.96 usd | -7.29 % | 3.66 % |
| 2000 | -$376.96 | -376.96 usd | -5.08 % | 4.28 % |
| 2200 | -$212.96 | -212.96 usd | -2.87 % | 4.89 % |
| 2400 | -$48.96 | -48.96 usd | -0.66 % | 5.51 % |
| 2600 | $115.04 | 115.04 usd | 1.55 % | 6.12 % |
| 2800 | $279.04 | 279.04 usd | 3.76 % | 6.73 % |
| 3000 | $443.04 | 443.04 usd | 5.97 % | 7.35 % |
| 3200 | $607.04 | 607.04 usd | 8.18 % | 7.97 % |
Every column here already carries the vacancy, maintenance and management allowances. Listings and spreadsheets usually do not, which is why the same property can be shown to cash-flow and not.
The formula
- Gross rent a year
2400 * 12 - Lost to vacancy
28800 * 8 / 100 - Rent actually collected
28800 - 2304 - Maintenance and capital
28800 * 10 / 100 - Management
26496 * 0 / 100 - Operating costs a year
4200 + 1800 + 0 * 12 + 2880 + 0 - Net operating income
26496 - 8880 - Cap rate
17616 / 320000 * 100 - Down payment
320000 * 25 / 100 - Amount borrowed
320000 - 80000 - Monthly rate
6.5 / 100 / 12 - Payments
30 * 12 - Mortgage payment a month
(240000 * 0.0054167 / (1 - pow(1 + 0.0054167, -360))) - Mortgage a year
1516.9633 * 12 - Cash flow a year
17616 - 18203.559 - Cash flow a month
-587.55908 / 12 - Cash actually put in
80000 + 9000 - Cash-on-cash return
-587.55908 / 89000 * 100 - Debt service coverage
17616 / 18203.559 - Rent as a share of price
2400 / 320000 * 100 - Cash flow if you ignore vacancy, maintenance and management
(28800 - 4200 - 1800 - 0 * 12 - 18203.559) / 12 - What those three allowances cost a month
383.03674 - -48.963256
Source: Federal Reserve Bank of St. Louis (FRED) — rental vacancy rate in the United States, US Census Bureau — Housing Vacancies and Homeownership (CPS/HVS)
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