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.
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.