Utility
Rental property NOI and cash flow calculator
Work out what a rental property earns in a normal year. Enter the rent you collect, the vacancy you expect, the operating expenses you pay, and any financing, and the calculator returns net operating income, before-tax cash flow, and the ratios lenders and buyers usually ask for.
Written by AreaAlpha, Property Pulse product team. Last reviewed .
In short
- How do you calculate net operating income and cash flow for a rental property?
- Net operating income is effective gross income minus operating expenses, excluding financing and capital spend. Before-tax cash flow subtracts debt service and reserves from net operating income. The calculator on this page applies those formulas in your browser and stores nothing.
Calculate net operating income and cash flow
The figures below start from an illustrative scenario. Replace them with your own; results update as you type and are never saved.
Annual result
- Gross scheduled income
- $30,000
- Vacancy and credit loss
- − $1,500
- Effective gross income
- $28,500
- Operating expenses
- − $15,000
- Net operating income
- $13,500
- Annual debt service
- − $0
- Capital reserve
- − $1,200
- Before-tax cash flow
- $12,300
Ratios
- Cap rate
- 4.50%
- Cash-on-cash return
- 4.10%
- Operating expense ratio
- 52.63%
- Debt service coverage
- —
- Break-even occupancy
- 50.00%
Net operating income ÷ price or value
Before-tax cash flow ÷ cash invested
Operating expenses ÷ effective gross income
Net operating income ÷ annual debt service
(Operating expenses + debt service) ÷ gross scheduled income
Notes on this scenario
- With no debt service entered, this is an all-cash result.
How each figure is calculated
| Figure | Calculation |
|---|---|
| Gross scheduled income | (monthly rent + other monthly income) × 12 |
| Vacancy and credit loss | gross scheduled income × vacancy rate |
| Effective gross income | gross scheduled income − vacancy and credit loss |
| Net operating income | effective gross income − annual operating expenses |
| Before-tax cash flow | net operating income − annual debt service − capital reserve |
| Cap rate | net operating income ÷ purchase price or value |
| Cash-on-cash return | before-tax cash flow ÷ cash invested |
| Debt service coverage ratio | net operating income ÷ annual debt service |
| Break-even occupancy | (operating expenses + debt service) ÷ gross scheduled income |
Net operating income deliberately excludes debt service, capital expenditure, depreciation, and income tax, so it describes the property rather than the buyer's financing.
What belongs in each input
- Operating expenses
- Recurring costs of running the property: taxes, insurance, association fees, repairs and maintenance, management, and utilities you pay. Exclude mortgage payments and improvement work.
- Capital reserve
- Money set aside annually for roofs, systems, and other long-lived replacements. It is not an operating expense, so it reduces cash flow without reducing net operating income.
- Cash invested
- What actually left your account to acquire the property: deposit, funds due at closing, and any initial work needed before it could be let.
- Vacancy and credit loss
- The share of scheduled rent you do not expect to collect, covering both empty months and unpaid rent.
Reading the result honestly
A single year's figures answer a narrow question: how this property performs under the assumptions you just entered. They are not a forecast. Change the vacancy rate or the maintenance figure and the cash flow moves substantially, which is usually the most useful thing the calculator shows.
Cap rate uses the price or value you enter, so comparing two properties only means something if you value both the same way. Cash-on-cash depends on financing and therefore describes your position rather than the asset.
Once a property is owned, estimates should give way to recorded transactions. Property Pulse computes the same figures from the property's actual cash-basis ledger, so the yearly result stops being an assumption and becomes a record.
How this page is produced
Written against the cash-basis accounting model Property Pulse implements. Formulas are stated in full so any figure can be reproduced by hand; nothing on this page is generated from customer data.
Last reviewed against Property Pulse v0.12.84.