How do I calculate rental property cash flow?
Quick answer
Rental property cash flow is the money left after every expense comes out of the rent you collect. Add your gross rental income, then subtract operating costs, the mortgage payment, and a reserve for repairs and vacancy. A positive number means the property pays you each month. A negative number means it costs you to hold it.
The cash flow formula
Cash flow follows one simple equation. Start with the rent and other income a property collects. Subtract everything you spend to operate and finance it. What remains is your monthly or annual cash flow.
- Gross income: rent collected plus fees, pet rent, or parking.
- Operating expenses: taxes, insurance, repairs, management, and any utilities you cover.
- Debt service: your mortgage principal and interest payment.
- Reserves: money set aside for vacancy and future repairs.
Income minus operating expenses gives net operating income. Subtract debt service and reserves from that, and you have true cash flow.
Expenses landlords forget to count
Optimistic math is the fastest way to buy a money losing rental. Rent minus mortgage is not cash flow. The gap between the two hides in costs that arrive irregularly but always arrive.
- Vacancy: no unit stays rented every single month, so budget for empty weeks.
- Capital repairs: roofs, water heaters, and appliances fail on their own schedule.
- Turnover: cleaning, paint, and listing costs between tenants.
- Management and admin: your time has value even when you self manage.
Set aside a monthly reserve for these. A rental that only clears when nothing breaks does not really cash flow.
Reading a positive or negative result
A positive number means rent covers every cost and still pays you. That surplus is what you can reinvest, save, or spend. A negative number means you feed the property from your own pocket each month.
Negative cash flow is not always a mistake, since some investors accept it for appreciation or tax reasons. But you should choose it on purpose, with eyes open, not discover it after closing. Run the full formula before you buy, then track the real numbers after.
From cash flow to smarter decisions
Cash flow is the input to almost every rental decision. It tells you whether to raise rent at renewal, refinance, hold, or sell. It also feeds return measures like cash on cash return, which compares annual cash flow to the cash you invested.
Track it monthly, not once a year. Small leaks, a creeping utility bill or slow rent collection, show up in monthly cash flow long before they surface on a tax return.
How Rentari helps
Rentari does the tracking so your cash flow number reflects reality. Auto-Accounting keeps a running ledger of income and expenses per property, and Expense and Receipt Scanning captures the repair and turnover costs that quietly erode returns.
From there, Tax-Ready Reporting summarizes income and expenses into owner reports you can act on, while the rental ROI calculator helps you model a purchase before you commit. You measure cash flow from real data, not a hopeful spreadsheet.
Related questions
What is a good cash flow on a rental?
Is cash flow the same as profit?
Should I include my mortgage in cash flow?
This article is general information for landlords, not legal, tax, or financial advice. Rules vary by state and city; verify specifics with the official statute or a licensed professional. See our state law guides.