Calculators · Investing

Rental cash flow

Every operating cost against the rent, the mortgage underneath, and the returns an investor and a lender each look at.

Monthly cash flow

−$923

$3,104 effective rent less $1,035 operating costs and a $2,992 mortgage payment. Break-even rent is $4,151 a month.

Cap rate: 3.82%; NOI ÷ price
Cash-on-cash: -7.6%; On $145,000 invested
Debt coverage: 0.69×; Lenders like 1.10+
Net operating income: $24,828; Per year
Expense ratio: 33%; Of effective rent
Total return, year 1: 13.4%; Cash flow + principal + appreciation

Annual operating statement

Gross rent: $38,400
Vacancy: −$1,152
Property tax: −$4,500
Insurance: −$1,800
Strata: −$4,200
Maintenance: −$1,920
Management: $0
Net operating income: $24,828
Mortgage payments: −$35,902
Cash flow: −$11,074
Principal paid down, year 1Equity built from the tenant’s rent: $10,971

Rent is the number to pressure-test

A 10% drop in rent takes this to about −$1,243 a month. Confirm achievable rent from current listings and recent leases in the building, not the seller’s figure.

Assumptions behind these figures

Net operating income = rent less vacancy, property tax, insurance, strata, maintenance and management. Debt service is the first year’s mortgage payments.
Cap rate = NOI ÷ price. Cash-on-cash = annual cash flow ÷ (down payment + closing costs). DSCR = NOI ÷ debt service.
Total first-year return adds principal paid down and appreciation to cash flow. Income tax, capital gains tax and the speculation and vacancy tax are left out.

These calculators are educational illustrations, not advice and not an offer of credit. Figures are estimates from the inputs you enter and simplified rules; your lender's calculation, rates, fees, taxes and qualification will differ and are confirmed only by a licensed mortgage professional, lawyer or accountant. Mervin Truong is a licensed real estate professional, not a mortgage broker or financial advisor.

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