How To Calculate Cash Flow & 7 Other Rental Income Formulas

Key Takeaways

  • A rental income calculator can help predict the potential profits from a given investment property.
  • Make sure you rely on accurate data when analyzing a deal and always err on the safe side during your calculations.
  • Investors can do calculations themselves, or they can utilize online rental property calculators to help.

The ability to evaluate deals is crucial to the success of any real estate investor. Whether you are deciding if you should move forward with a deal or simply evaluating an existing property, a thorough rental property analysis is key. Luckily, with the right rental property calculator, making those choices becomes easier. So if you want to find the best investment properties with the most attractive profit margins, try using the following calculations to analyze your next deal…You might be surprised by what they can help you predict.

Performing A Rental Property Analysis: 8 Factors To Consider

A thorough rental property analysis will provide insights on the potential profitability of a given deal; that’s why it is crucial to know which indicators to look for and consider. Here are eight crucial factors for your next rental property cash flow analysis:

  • Location: You can change a lot about a property, but you can’t move it to another neighborhood. The location of a rental property will influence its desirability and your ability to keep vacancy rates low. Pay attention to market factors when deciding on an area, and don’t be afraid to shop around.
  • Income And Cash Flow: Income refers to the amount of rental income generated, while cash flow represents the net amount of cash being transferred into and out of a property. These indicators can help investors determine whether or not a property will be profitable.
  • Property Type: Property type refers to the number of units and type of house you are looking at. Examples include single-family homes, multi-family homes, duplexes, apartments, townhouses, condos, and more. Each type of property will come with unique advantages and disadvantages, so be sure to weigh the pros and cons of each property in your area.
  • Ideal Tenants: Tenants are where most of your income is generated when investing in rental properties, which is why the right tenants are crucial to your success as a real estate investor. Meet with the current owners of a property and ask if they have any problems with the existing tenants. It will also benefit you to tailor your marketing techniques and prepare appropriate rental applications to attract reliable tenants.
  • Vacancy Rates: Vacancy rates are determined by looking at what portion of the year a property does not have tenants. A perfect vacancy rate would be zero percent, meaning the property is generating rental income through the entire year. While it is not impossible to have a nonexistent vacancy rate, factor in the possibility of vacancies when calculating possible rental expenses.
  • Rental Strategy: Decide whether you are focusing on short- or long-term rental properties, which will influence the types of homes and areas you should invest in. A long-term rental property is a more traditional rental property involving leases, and long-term tenants. Short-term rentals are typically thought of as vacation homes or Airbnb rentals. Both can yield attractive results, depending on your target real estate market.
  • Operating Expenditures: Operating expenditures are any ongoing costs of running a rental property. They include maintenance costs, equipment, insurance, utilities and any other operational costs. To determine operating expenditures, add up maintenance costs, property management fees and and other costs of running the property.
  • Capital Expenditures: Capital expenditures refer to issues that need to be taken care of periodically, but not as frequently as operating costs. Physical assets such as property, industrial buildings, or equipment could be counted as capital expenditures. To better understand the differences between capital and operating expenditures, check out this in-depth analysis.

[ Learn how to analyze deals like a pro! Attend a FREE real estate class in your area to learn how to identify the most rewarding investment deals. ]

calculate cash flow

What Is A Good ROI For A Rental Property?

ROI in real estate stands for “return on investment”, otherwise known as the amount of profits investors can expect to receive from a rental property. While a good ROI will vary from investor to investor, there are some ranges that can be used as general guidelines. An ROI between five and 10 percent is reasonable for most rental properties. On the opposite end of the spectrum, an ROI of over 10 percent typically represents a great investment opportunity.

As you consider the ROI on rental property, remember to pay careful attention to each variable you consider, such as the vacancy rate, operating costs and more. Keep in mind it is better to err on the side of caution when estimating the potential ROI. By identifying accurate numbers, and leaving yourself some wiggle room, you can help ensure your estimates are as close to reality as possible.

Calculating Rental Income

A rental property calculator works by relying on certain variables to determine the potential performance of the investment property. There are a number of formulas that can be useful during the process, but there are a few numbers you should have on hand before getting started. Make note of the current property value, total cash investment, mortgage rate, loan term, and closing costs. You will also want to estimate a few numbers, including the expected rental yield, property expenses and vacancy rate.

Once you have some basic information on the rental property, you can rely on a rental property analysis calculator to estimate the profitability automatically. There are a wide array of rental property analysis software that can assist you during this process. Depending on what you are trying to determine first, you can search online for different rental property calculators. This rental ROI calculator provided by SparkRental is a great place to start, as well as this annual cash flow calculator by

If you do opt to act as your own rental income calculator, there are several formulas you can rely on to help. First, it is a good idea to write out each of the variables listed above, as to ensure you have them all in one place. Create a rental property analysis spreadsheet using Microsoft Excel or Google Sheets—depending on what you are comfortable with—and start working through the rental income calculations below.

When To Use A Rental Property Calculator

A rental property calculator should be used by investors analyzing potential deals or evaluating existing rental properties. While a rental property calculator is not required for making sound investment decisions, it can provide insights to the potential or current profits of a property. Investors who employ a rental property calculator when deciding whether or not to invest in a given property can avoid making costly mistakes. On the other hand, investors who rely on a rental property calculator to evaluate existing properties can determine if it is time to sell or reorganize.

Investment property calculators are helpful in evaluating almost any type of property, ranging from single-unit homes to multi-unit apartment buildings. These calculators are not exclusive to first-time investors either! Any investor, regardless of experience, can use the calculations to help make accurate predictions on potential rental yield and so much more. In addition, investors who are selling a property can pass on the findings from their rental property calculations to the buyer to speed up and improve the sale. Remember, the right rental property calculator can effectively guide you through both buying and selling an investment property.

7 Cash Flow Equations For The Passive Income Investor

In order to calculate cash flow for a given property, there are several formulas investors will want to be familiar with. While these formulas may seem overwhelming at first, understanding how to calculate rental income and more is crucial for any deal analysis. Here are some of the cash flow equations investors can use when evaluating a property:

  • Net Operating Income
  • Cash On Cash Returns
  • Return On Investment
  • Rental Yield
  • Internal Rate Of Return
  • Capitalization Rate
  • Cash Flow

rental property calculator


No matter where you are in your career as a real estate investor, the right rental property calculator can help guide your investment decisions. If you are evaluating an existing property, place an emphasis on finding accurate numbers. By carefully calculating your property’s performance, you can determine how to move forward. When used correctly, a reliable rental property calculator can enable investors to choose profitable real estate deals and—in turn—boost their portfolios.

Which calculations did you find most helpful? Share your thoughts in the comments below.

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