Investment Property Cash Flow Calculator
Determine the monthly cash flow of a rental property after accounting for mortgage payments, vacancy losses, and operating expenses. Use it to evaluate whether a potential investment property will generate positive returns.
About this calculator
Monthly cash flow is the money left after all property-related costs are paid from rental income. The formula is: Cash Flow = (Monthly Rent × (1 − Vacancy Rate)) − Mortgage Payment − Operating Expenses. The mortgage payment uses the standard amortization formula M = P × [r(1+r)³⁶⁰] / [(1+r)³⁶⁰ − 1], where P = purchase price minus down payment, and r = annual rate ÷ 12, assuming a 30-year term. The vacancy rate accounts for periods when the unit is unoccupied, typically 5%–10% for most markets. Operating expenses include property taxes, insurance, maintenance, and property management fees. A positive result means the property generates income; a negative result (negative cash flow) means you're subsidizing the property out of pocket each month. Cash-on-cash return — annual cash flow divided by total cash invested — is the key metric investors use to compare deals.
How to use
Consider a property purchased for $350,000 with a $70,000 down payment (20%), an investment rate of 7.5%, monthly rent of $2,400, a 7% vacancy rate, and $800/month in expenses (taxes, insurance, maintenance). Loan P = $280,000; r = 7.5%/12 = 0.625%; M = 280,000 × [0.00625 × (1.00625)³⁶⁰] / [(1.00625)³⁶⁰ − 1] ≈ $1,958. Effective rent = $2,400 × 0.93 = $2,232. Cash flow = $2,232 − $1,958 − $800 = −$526/month. This negative cash flow signals the deal may need renegotiation or a larger down payment.
Frequently asked questions
What is a good monthly cash flow for an investment property?
Most real estate investors target a minimum of $100–$300 positive cash flow per unit per month as a starting benchmark, though higher is always preferable. The '1% rule' — monthly rent should be at least 1% of the purchase price — is a quick screening heuristic, though it's harder to achieve in expensive markets. Cash-on-cash return of 6%–10% annually is generally considered a solid return for residential rentals. Keep in mind that cash flow is only part of total return; appreciation, loan paydown, and tax benefits also contribute to overall investment performance.
How does vacancy rate affect rental property cash flow calculations?
Vacancy rate represents the percentage of time a property sits empty and generates no rental income. Even a modest 5% vacancy rate on a $2,000/month rental reduces effective annual income by $1,200. In markets with tight housing supply, vacancy rates might run 3%–5%, while slower markets or properties requiring frequent tenant turnover might see 8%–12%. Using a realistic vacancy assumption is critical — overestimating rental income by ignoring vacancy is one of the most common mistakes new investors make. Always stress-test your cash flow at a higher vacancy rate than you expect.
Why do investment property mortgage rates tend to be higher than primary residence rates?
Lenders view investment properties as higher-risk collateral because borrowers are more likely to prioritize payments on their primary home during financial stress. To compensate for this elevated default risk, lenders typically charge 0.5%–1.0% more in interest on investment property loans versus owner-occupied mortgages. Additionally, underwriting requirements are stricter: most lenders require at least 20%–25% down, strong credit scores (usually 720+), and documented rental income history. These factors combined mean investment property financing is more costly, which directly reduces cash flow and must be factored into any purchase analysis.