Enter the monthly mortgage payment, monthly insurance and tax, occupancy rate, and average monthly rent charged into the calculator to determine the rental cash flow.
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Rental Cash Flow Formula
The following equation can be used to estimate a rental cash flow.
RCF = R*OR – M – T & I
- Where RCF is the rental cash flow
- R is the average monthly rent
- OR is the occupancy rate (safe estimate of 94%)
- M is the monthly mortgage payment
- T&I is the monthly tax & insurance cost
Rental Cash Flow Definition
Rental cash flow is defined as the total cash generated each month from a rental property after monthly costs have been subtracted.
Rental Cash Flow Example
How to calculate rental cash flow?
- First, determine the average monthly rent.
Determine the average monthly rent charge for the unit or building.
- Next, determine the occupancy rate.
This is the percentage of months the property will be rented out.
- Next, determine the monthly mortgage payment.
Calculate the total monthly mortgage cost.
- Next, determine the taxes and insurance.
Calculate the total monthly payments made on taxes and insurance.
- Finally, calculate the rental cash flow.
Calculate the rental cash flow using the equation above.
A cash flow of at least 15% above your monthly costs is considered average.