Rental property cash flow
Start with the rent you can actually collect. Keep operating income, debt service, capital reserves, and sale proceeds distinct.
Work with your numbers
Starting figures are examples, not current market rates or personal advice. All monetary inputs are U.S. dollars. Inputs stay in this browser.
First-year monthly rental cash flow
-$225Illustrative estimate from the inputs above. No taxes or investment outcomes are guaranteed.
- First-year cap rate (before debt/capital)
- 5.39%
- First-year cash-on-cash return
- -3.03%
- Holding-period profit after sale
- $16,750
The property needs additional cash in year one under these assumptions. Appreciation is not cash flow.
Operating performance before and after financingScroll horizontally on small screens.
| Year-one money trail | Annual amount |
|---|---|
| Collected income | $27,360 |
| Operating expenses | $11,189 |
| NOI = income − operating expenses | $16,171 |
| Debt service | $17,066 |
| Capital replacement spending | $1,800 |
| Cash flow = NOI − debt service − capital | -$2,695 |
| Initial cash invested | $89,000 |
No annualization or income-tax benefits assumedScroll horizontally on small screens.
| Holding-period reconciliation | Amount |
|---|---|
| Cumulative rental cash flow | -$10,541 |
| Home value at exit | $347,782 |
| Less sale costs | $20,867 |
| Less remaining debt | $210,625 |
| Net sale proceeds | $116,291 |
| Less initial cash invested | $89,000 |
| Profit = cash flow + net proceeds − initial cash | $16,750 |
| Holding-period ROI (not annualized) | 18.82% |
Annual operating ledger
Income and expense growth are separate assumptionsScroll horizontally on small screens.
| Year | Income | Operating costs | NOI | Debt service | Capital spent | Cash flow | Ending debt |
|---|---|---|---|---|---|---|---|
| 1 | $27,360 | $11,189 | $16,171 | $17,066 | $1,800 | -$2,695 | $222,485 |
| 2 | $27,907 | $11,413 | $16,495 | $17,066 | $1,836 | -$2,407 | $219,802 |
| 3 | $28,465 | $11,641 | $16,825 | $17,066 | $1,873 | -$2,114 | $216,939 |
| 4 | $29,035 | $11,874 | $17,161 | $17,066 | $1,910 | -$1,815 | $213,884 |
| 5 | $29,615 | $12,111 | $17,504 | $17,066 | $1,948 | -$1,510 | $210,625 |
How the numbers reconcile
- Collected rent = potential rent × (1 − vacancy). Other income is entered as expected collected income. Management applies to total collected income.
- NOI = collected income − operating expenses, before financing and capital replacement spending. Cash flow = NOI − debt service − capital replacement spending. The entered capital amount is modeled as spent, not a refundable cash reserve.
- Cap rate = first-year NOI ÷ purchase price. Cash-on-cash = first-year cash flow ÷ initial cash invested. Holding-period profit = cumulative cash flow + net sale proceeds − initial cash invested. Sale proceeds already subtract the remaining mortgage.
A worked reference case
With $24,000 annual rent, 10% vacancy, $6,000 operating costs and no debt, NOI is $15,600. Subtract $1,200 of capital replacement spending: annual cash flow is $14,400. For a $200,000 purchase, cap rate is 7.8%, not 7.2%.
Assumptions and limits
Pre-tax, nominal totals, not IRR or annualized return. Excludes tax depreciation, capital-gains/recapture tax, deposits, appreciation from improvements, refinancing, personal use, unusual assessments and investment returns on distributions. Rent and expenses grow annually; home value compounds monthly. A zero initial investment makes cash-on-cash undefined, not infinite. This is not a tax return or lending qualification model.
Source checked October 6, 2026: IRS: rental income, expenses and depreciation. Sources inform the definitions; starting figures are illustrative inputs, not sourced market quotes.
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