How to calculate rental cash flow
Rental cash flow is the money left each month after vacancy, operating costs and the loan payment. Here is the calculation line by line, with a worked example and the mistakes that make cash flow look better than it is.
FlipMetric guide · Reviewed 2026-11-10
What is rental cash flow?
Rental cash flow is what's left from the rent after you pay every cost of owning the property, including the mortgage. Positive cash flow means the property pays for itself; negative cash flow means you add money every month.
How do you calculate it?
- Start with monthly rent and any other income, such as parking or laundry.
- Subtract vacancy, the rent you expect to lose between tenants.
- Subtract operating costs: property tax, insurance, HOA, maintenance, capital expenses, management and any utilities you pay.
- The result is net operating income (NOI).
- Subtract the loan payment (principal and interest).
- What's left is cash flow.
A worked example, month by month
This is the same $200,000 rental used in the buy and hold guide: 25% down, a 30-year loan at 6.75%, and FlipMetric's default percentages, which are applied to the rent.
| Line | Monthly |
|---|---|
| Rent | $1,900.00 |
| Vacancy (5%) | −$95.00 |
| Property tax | −$250.00 |
| Insurance | −$120.00 |
| Maintenance (5%) | −$95.00 |
| Capital expenses (5%) | −$95.00 |
| Management (8%) | −$152.00 |
| Net operating income | $1,093.00 |
| Loan payment | −$972.90 |
| Cash flow | $120.10 |
That is about $1,441 a year. It is positive, but thin: one unexpected repair can wipe out a year of cash flow, which is why the reserve lines matter.
Why include maintenance and capital expenses if nothing is broken?
Because things will break. Maintenance covers routine repairs. Capital expenses set money aside for big replacements such as a roof, HVAC system or water heater. Leaving them out makes cash flow look higher today and turns into a large bill later.
How can you improve cash flow?
- Pay less. A lower price shrinks the loan and the property tax.
- Put more down. A smaller loan means a smaller payment, though your cash-on-cash return may fall.
- Raise income. Check market rent; HUD's Fair Market Rents for the county are a cautious baseline.
- Cut costs. Shop insurance, and decide whether you'll self-manage.
Mistakes that inflate cash flow
- Counting only the mortgage. Tax, insurance and repairs are real monthly costs.
- Using the seller's tax bill. A sale can raise the assessment.
- Assuming no vacancy. Even good tenants move out.
- Ignoring management. If you self-manage, your time still has a cost.
Try it with your own figures in the rental cash flow calculator.
Questions people ask
Educational material from FlipMetric, not financial advice. Disclaimer.