INVESTOR GUIDE

How Do I Calculate Rental Property Cash Flow?

The step-by-step formula — from gross rent down to what's actually left over each month — with a full worked example.

Short answer: rental property cash flow is gross rental income, minus a vacancy allowance, minus operating expenses (taxes, insurance, management, maintenance, a capital expenditure reserve, and any owner-paid utilities), minus your mortgage principal and interest payment. What's left is your monthly cash flow — positive, break-even, or negative.

The formula itself is simple; the part investors most often get wrong is skipping or underestimating one of the expense categories — especially vacancy and CapEx reserves — which makes a property look more profitable on paper than it will be in practice. The six steps below walk through the calculation in order.

The Cash Flow Formula, Step by Step

1. Gross Income

Monthly rent plus any other income the property generates — parking, laundry, storage, pet fees.

2. Subtract Vacancy

Apply a vacancy allowance (commonly 5-8% of gross income) to get effective income — what you realistically expect to collect.

3. Subtract Operating Expenses

Property taxes, insurance, HOA, property management, maintenance, a CapEx reserve, and any owner-paid utilities.

4. That Leaves NOI

Net Operating Income — effective income minus operating expenses, before the mortgage payment.

5. Subtract Financing

Subtract your monthly mortgage principal and interest payment (not taxes/insurance if already counted above).

6. That's Cash Flow

What's actually left over each month — positive, break-even, or negative.

Full Worked Example

A single-family rental renting for $2,800/month, plus $100/month in other income, with 5% vacancy:

Gross income (rent + other)$2,900
Less vacancy (5%)−$145
Effective income$2,755
Property taxes + insurance−$575
HOA−$75
Management + maintenance + CapEx−$500
Other expenses−$80
Net Operating Income (NOI)$1,525
Less mortgage P&I ($248,000 loan, 6.75%, 30yr)−$1,608
Monthly Cash Flow−$83

This property is slightly cash-flow negative at these assumptions — a reminder that strong rent alone doesn't guarantee positive cash flow once every expense and the mortgage payment are included.

Related terms: Net Operating Income and DSCR in the full glossary.

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This guide covers the formula. A Reaixo analysis applies it to your actual property — cash flow, cap rate, and return metrics, all in one place.

This guide is for educational and informational purposes only. It is not investment, financial, tax, or legal advice. Actual cash flow depends on financing, market conditions, and property-specific factors — verify any numbers with your own research and appropriately qualified professionals before investing. Reaixo reports are AI-assisted and provided for informational and educational purposes only. They are not appraisals, home inspections, engineering assessments, contractor estimates, legal advice, tax advice, lending decisions or financial advice. Property information, cost estimates and market assumptions may be incomplete or inaccurate and should be independently verified with qualified professionals.