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How to calculate rental cash flow, step by step

By Cedrick Reese, Property Rental Calculator · Updated August 2026

Here's exactly how to calculate rental cash flow: the money left over each month after the property pays for itself, including the mortgage. It's the number that decides whether a rental feeds you or bleeds you. Here's how to build it up, step by step, using the same order the calculator uses.

Step 1: Start with gross scheduled income

Add up all the income the property can produce in a month at full occupancy: rent plus any extras like parking, storage, or laundry. Call this gross scheduled income.

Step 2: Subtract a vacancy allowance

No rental stays occupied 100% of the time. Set aside a share of rent for empty months. A common budgeting range is about 5% to 8% a year, though it varies by market. What's left is your effective gross income.

Step 3: Subtract operating expenses

Operating expenses are the recurring costs of running the property, not including the mortgage. The usual list: property taxes, insurance, property management (often around 8% to 12% of rent if you hire it out), a maintenance reserve, a capital expenditure reserve for big-ticket replacements, and anything else like HOA dues or owner-paid utilities. Effective gross income minus operating expenses gives you net operating income (NOI). For help estimating these, see how to estimate operating expenses.

Step 4: Subtract the mortgage

Now subtract your monthly mortgage payment (principal and interest). NOI minus the mortgage is your monthly cash flow. Multiply by 12 for the annual figure.

A worked example

Say a property rents for $2,100 a month with no other income. Take out 5% for vacancy ($105), leaving $1,995 effective gross income. Operating expenses (taxes, insurance, 8% management, an 8% maintenance and capex reserve) come to about $703. That's roughly $1,292 of monthly NOI. If the mortgage is about $1,331, monthly cash flow is around negative $39. That's a deal that barely breaks even before financing and dips slightly negative after, which is easy to miss if you only looked at rent minus mortgage.

The mistake that ruins the math

The most common error is leaving out reserves. Skipping the maintenance and capex set-aside makes a property look cash-flow positive right up until the roof or the HVAC needs replacing. Those costs are real even in the months you don't spend them, so budget for them from day one. And don't confuse cash flow with your tax result: nearly half of landlords report a rental loss on their tax return, largely because of depreciation, as the IRS landlord statistics show.

You can run all of this automatically, including the mortgage and every reserve, in the Rental Property Calculator.