Cash flow is the number that tells you whether a rental pays you or you pay it. Here is how to calculate the real kind, step by step, including the costs that quietly turn a positive deal negative.
Monthly cash flow is gross rent minus every operating expense minus the mortgage payment. The word that trips people up is "every." Leave out vacancy, maintenance, capital expenditures, or management and your cash flow looks better on paper than it will in your bank account.
Cash flow = gross rent minus operating expenses minus debt service
Gross rent is the total monthly rent. Operating expenses are the costs of running the property. Debt service is your principal and interest payment. What remains is your monthly cash flow.
A single-family rents for $2,000 a month. Taxes and insurance run $400. Vacancy, maintenance, capital expenditures, and management together are budgeted at about 33% of rent, or $660. The mortgage payment is $850.
Cash flow equals $2,000 minus $400 minus $660 minus $850, which is $90 a month. Positive, but thin, and it would turn negative if you had skipped the reserves. That is exactly why the reserves belong in the math from the start.
The free DealGauge calculator runs this whole calculation as you type, with every reserve built in by default, then grades the deal A to F and shows your walk-away price.
After. Cash flow is what remains once both operating expenses and the mortgage payment are subtracted from rent.
Vacancy, maintenance, capital expenditures, and management. These are real whether you budget them or not, and leaving them out is the most common way a deal looks better than it is.
There is no single number, but many investors want a clear positive cushion per unit rather than a razor-thin margin. Compare it to your goals and to the cash you invested, which is cash-on-cash return. See our cash-on-cash guide.
Enter a property and get an A-to-F grade, the verdict, and your exact walk-away price. Every real expense is built in by default.
Grade my dealBefore Your First Rental covers what a rental actually costs to own, the arithmetic most first-time buyers get wrong, and a worked example where the obvious math says $1,360 a month and the real math says $193. You also get the 12 point deal checklist and this quarter's market report. All three download instantly on the next page, with no confirmation click.
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The Investor Model is the whole arithmetic, built to answer the expensive question: should you buy this at all? Ten tabs, including a five year projection with IRR, an after tax view, a BRRRR planner, a sensitivity grid, and three deals compared side by side under identical rules. Own it once, no subscription, thirty day money-back guarantee.
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General information and educational content only, not investment, tax, or legal advice. Benchmarks are common rules of thumb, not guarantees or projected results. Market figures are from public government sources as of the dates shown and may be revised. Verify every figure and consult a qualified professional before purchasing any property.