Decision guide
Rental Property Cash Flow Formula
Calculate rental property cash flow from rent, vacancy, operating expenses, reserves, and debt service without confusing revenue with profit.
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Quick Answer
Rental Property Cash Flow Formula is worth reviewing before you trust a calculator result because the assumptions behind the model usually matter as much as the formula.
Key Takeaways
- Gross scheduled monthly rent
- Vacancy, concessions, and collection loss
- Operating expenses and capital reserves
- Monthly principal and interest
- Base and downside cash-flow results
Cash flow starts with collected rent
Begin with the rent you realistically expect to collect, not the highest advertised rent. Reduce scheduled rent for vacancy, concessions, and nonpayment assumptions before subtracting expenses.
Subtract operations and debt service
Deduct taxes, insurance, repairs, maintenance, management, owner-paid utilities, association dues, and reserves. Then subtract principal and interest to estimate cash flow after financing.
A monthly result needs a stress test
Run a base case and a downside case with lower rent, higher repairs, or a longer vacancy. The gap between those results shows whether the property has a usable cash cushion.
Checklist Before You Decide
- Gross scheduled monthly rent
- Vacancy, concessions, and collection loss
- Operating expenses and capital reserves
- Monthly principal and interest
- Base and downside cash-flow results
FAQ
What is the rental property cash flow formula?
A practical formula is collected rent minus operating expenses, reserves, and debt service. Use consistent time periods and avoid counting security deposits or borrowed funds as rental income.