Rental Income Calculator
The formula
The reserves decide whether you survive
Beginner analyses routinely omit vacancy, CapEx and maintenance — and then a single HVAC replacement wipes out two years of “profit.” Industry rules of thumb: 5–10% of rent for maintenance, 5–10% for CapEx, 5–8% vacancy (higher in seasonal or student markets). This calculator includes all three by default; do not zero them out to make a deal pencil.
Frequently asked questions
What is a good cash-on-cash return?
Is rental income taxed?
Source & methodology
Standard rental-property cash-flow analysis (BiggerPockets / Appraisal Institute methodology).
How Rental Income works — and what your result really means
You are checking what an income number really means after the deductions and conversions are applied. There are plenty of pages about Rental Income; almost none of them show the working. This one does: the formula, every input, a fully computed example, and a sensitivity analysis calculated live from this engine’s own defaults.
Most confusion about Rental Income comes from mixing up the input you control with the input you merely observe. The formula treats them identically, but your decisions should not: one deserves measurement, the other deserves a defensible estimate.
Like most useful measures, Rental Income is a summary, and summaries hide as much as they reveal. The companion outputs and the input table are here to reopen what the headline compressed.
Nothing below is stock text pasted around a number: the worked example computes monthly cash flow = $-387.73 from this tool’s own defaults, and the sensitivity section ranks the inputs that move the result — Purchase price first, at ≈41.2 % of the headline for a ten-percent error either way in that input — which is the thread the rest of this guide pulls on.
The Rental Income formula, explained
Here is the complete model this tool runs — Cash flow = gross rent − vacancy − operating expenses − debt service; cap rate = NOI ÷ price; cash-on-cash = annual cash flow ÷ cash invested — with each input explained below. If a competitor’s page gives you a different answer from the same inputs, this is the text that settles which of you is right.
Monthly rent (example value $2,200.00) is a currency figure — enter the total exactly as your document states it, fees included. If you are unsure what belongs in this field, look at the printed steps: the substitution shows exactly how the engine uses it.
Purchase price (example value $300,000.00) is a currency figure — enter the total exactly as your document states it, fees included. Use the figure exactly as the source document states it, not a rounded memory of it — an omitted line is the classic silent error.
Down payment (%) (example value 20) is a numeric input whose unit is fixed by the label; a wrong unit is a wrong answer wearing a plausible disguise. Rates are the most mis-transcribed input on any page like this; copy it from the document rather than retyping from memory.
Mortgage rate (%) (example value 7) is a numeric input whose unit is fixed by the label; a wrong unit is a wrong answer wearing a plausible disguise. Check the convention first: if the source says “6.5 % per year”, type 6.5 and let the formula do the rest.
Mortgage term (years) (example value 30) is a numeric input whose unit is fixed by the label; a wrong unit is a wrong answer wearing a plausible disguise. Be precise about the boundary (exact date, start of month); time inputs decide the exponent in most formulas.
Vacancy rate (%) (example value 7) is a measured number in the unit named by the label; the formula does not convert for you. Enter it exactly as your document states it — quoted annual, monthly and effective rates are three different numbers.
Annual property taxes (example value $3,000.00) is a money value, and money values are where rounding habits do the most damage — type the real figure, not a tidied one. Replace the example with the figure from your own records — the tool recomputes instantly and the printed steps follow your numbers.
Annual insurance (example value $1,500.00) is a monetary input: one currency throughout, otherwise the result stops being comparable. If you are unsure what belongs in this field, look at the printed steps: the substitution shows exactly how the engine uses it.
Maintenance (% of rent) (example value 8) is a plain measured quantity — the unit shown in the label is the unit the formula expects. Enter it exactly as your document states it — quoted annual, monthly and effective rates are three different numbers.
Management fee (% of rent) (example value 8) is a quantity rather than a category — precision here is cheap and worth having. Rates are the most mis-transcribed input on any page like this; copy it from the document rather than retyping from memory.
CapEx reserve (% of rent) (example value 5) is a quantity rather than a category — precision here is cheap and worth having. Rates are the most mis-transcribed input on any page like this; copy it from the document rather than retyping from memory.
A fully worked Rental Income example
Rather than describe the calculation, here it is end to end — every substitution in order, starting from the inputs above. Starting figures: Monthly rent, Purchase price, Down payment (%), Mortgage rate (%). Run to the end, the monthly cash flow resolves to $-387.73 — Negative — you subsidize the property each month on the bands this tool uses.
- Effective rent = 2,200 × (1 − 7% vacancy) = 2,046
- Mortgage on 240,000 at 7% / 30y = 1,597/mo
- Cash flow = effective rent − opex (837) − mortgage = -388/mo
- Cash-on-cash = annual cash flow ÷ 60,000 invested = -7.75%
Annual cash flow — $-4,653. This is the number experienced users quote when the headline alone would mislead.
Cash-on-cash return — -7.75%. Read next to the headline, this is the figure that shows the shape of the trade-off.
Mortgage payment / mo — $1,596.73. Read next to the headline, this is the figure that shows the shape of the trade-off.
Effective rent / mo (after vacancy) — $2,046.00. This is the number experienced users quote when the headline alone would mislead.
Total monthly expenses (opex + debt) — $2,433.73. If your inputs change, this is usually the first companion figure to move.
Keep this worked example open while you enter your own figures: matching the shape of the substitution is the fastest way to spot a unit or convention mistake.
The Rental Income corridor: your result across a realistic band
The honest version of any estimate is a corridor, and this one is cheap to produce: Rental Income was recomputed at 5 points along the dominant input, with every other field left untouched.
| Purchase price setting | Monthly cash flow |
|---|---|
| 80 % of the example value | $-68.38 |
| 90 % of the example value | $-228.05 |
| example inputs | $-387.73 |
| 110 % of the example value | $-547.40 |
| 120 % of the example value | $-707.07 |
Across 5 settings of Purchase price, the result spans $-707.07 to $-68.38. A decision that only works at one row of this table is a decision waiting for an input to move. Reproduce it in the form above by editing Purchase price alone; the substitution steps will follow your figures exactly.
What actually moves your Rental Income
Nobody should have to guess which input matters. The engine was re-run once per field below — ten percent up, ten percent down, everything else frozen — and the results ranked by how far they moved the monthly cash flow. It is the fastest honest answer to “what matters most in Rental Income?” — and it is specific to these defaults, because sensitivity moves with the starting point.
- Purchase price: ten percent up gives $-547.40, ten percent down gives $-228.05 — ≈41.2 % of the monthly cash flow either way
- Monthly rent +10 % → Rental Income = $-229.33 · −10 % → $-546.13 (the monthly cash flow shifts ≈40.9 %)
- Mortgage rate +10 % → Rental Income = $-502.10 · −10 % → $-276.53 (the monthly cash flow shifts ≈29.5 %)
- Mortgage term: ten percent up gives $-346.43, ten percent down gives $-441.76 — ≈13.9 % of the monthly cash flow either way
- Down payment: ten percent up gives $-347.81, ten percent down gives $-427.64 — ≈10.3 % of the monthly cash flow either way
- Annual property taxes: ten percent up gives $-412.73, ten percent down gives $-362.73 — ≈6.4 % of the monthly cash flow either way
Purchase price is the dominant lever here: ten percent either way moves the result by about 41.2 %, from $-547.40 to $-228.05. Measure that input from a document rather than from memory, and Monthly rent is effectively tied with it (≈40.9 % for the same nudge), so verify the pair together. The remaining fields can sit at safe defaults without materially changing the answer — knowing which is which is what separates a careful calculation from an anxious one.
Reading the result: bands, zones and thresholds
Nobody acts on a bare figure — they act on a figure with a comparison attached. On the example inputs the band reads “Negative — you subsidize the property each month”; your own figures place you on a different rung of the same ladder. Before treating the band as fact, note its width: ten percent either way on Purchase price already spans $-547.40 to $-228.05. The practical reading rules: ask what would have to change to move you one band. If the answer is “a small, plausible input difference”, the band itself is not the finding — the uncertainty is.
Where Rental Income sits next to similar measures: this tool answers “how much is the Rental Income”, while the related calculators answer “what do I do about it”. Reading the result alone tends to over-weight a single snapshot; pairing it with the companion tools above turns the number into a decision.
How people get Rental Income wrong
Reading Rental Income as a promise rather than a conditional. Every number here is of the form “if these inputs, then this result”; when an input moves, the honest response is to recompute rather than to defend the old figure.
Reading Rental Income as a promise rather than a conditional. Every number here is of the form “if these inputs, then this result”; when an input moves, the honest response is to recompute rather than to defend the old figure.
One mistake is specific to this engine: assuming every input matters equally. The computation above shows Purchase price dominating — a careful figure there beats false precision everywhere else.
The subtlest error is answering the wrong question precisely. Confirm that monthly cash flow is actually the quantity your decision needs — the arithmetic is flawless either way, which is what makes the mistake invisible.
Before you trust your Rental Income: a short checklist
- Compare the output against one published benchmark or a colleague’s independent estimate.
- Check that every field the formula needs actually arrived from a document, not from recollection.
- Put Purchase price under a magnifier; the sensitivity table above is the reason why.
- Note the date and the inputs beside the number so the figure can be audited later.
- Compare the result with one independent method or published benchmark.
- Confirm the answer against one independent method or published benchmark for Rental Income.
Five steps from raw inputs to a figure you can defend
The tool does the arithmetic; the routine below is what makes the arithmetic trustworthy. Five steps, a minute total — and afterwards you will know not just what the number is, but which assumption produced it.
Step 1 — collect, then type. Everything this tool asks for is listed above (monthly rent, purchase price, down payment (%), mortgage rate (%), mortgage term (years), vacancy rate (%) and the remaining fields listed above). Pull each figure from something you can point at — paperwork, a dashboard, a label — before touching a field. Guesswork at the input stage cannot be repaired at the interpretation stage. Precision is a promise you make about your data; make sure your inputs can keep it.
Step 2 — compute the version you would not be embarrassed by. If a stranger audited your inputs, which set would you hand over? Enter that set, read the result, and treat everything else as upside. Half of a good calculation is knowing which input you would hate to be wrong about.
Step 3 — change one input at a time. Nudge a single field by ten percent, watch the headline and its companions move, then undo it. Two or three fields will dominate — the sensitivity table above already ranks them for this engine. Suspiciously tidy answers deserve the same scrutiny as untidy ones.
Step 4 — ask what would have to be true. Take the result you want and work backwards through the inputs until you find the assumption that produces it; then decide honestly whether that assumption is defensible. Say the answer out loud before you save it; if it sounds wrong, the model did not change, your understanding did.
Step 5 — record the context, not just the number. Note today’s date and the inputs alongside the $-387.73 output. Six months from now the context is what turns this figure into a trend. Compare the calculation to the rough guess you arrived with, and ask why they differ.
The real-world conversations Rental Income settles
In Property Management the figure computed here is usually the first one somebody asks to see. Having it — with the formula behind it — changes your position in the conversation from participant to reference. Say the answer out loud before you save it; if it sounds wrong, the model did not change, your understanding did.
The companion outputs — Annual cash flow and Cash-on-cash return — exist for the second stage of that screen: the headline sizes the prize, while the companions describe the trade-off you are accepting to get it. The inputs are the part of the work that nobody else can do for you.
There is a personal-administration use people overlook: periodic self-checking. Rental Income quietly drifts as life changes — rates move, bodies change, costs compound — and re-running it a few times a year catches drift while correction is still cheap. Write the figure down before moving on; memory flatters whichever number you saw last.
Rental Income — frequently asked questions
What affects Rental Income the most?
The short answer: Purchase price. The longer answer is the sensitivity table on this page, where every numeric input was probed by ten percent and the monthly cash flow recalculated — Purchase price moved it furthest, by roughly 41.2 % ($-547.40 to $-228.05).
Do monthly rent and purchase price matter equally?
Effectively. Measured on this engine they land at ≈41.2 % and ≈40.9 % for the same ten-percent nudge, so the honest advice is to get both right; chasing precision in only one of them buys almost nothing.
What is a typical Rental Income?
There is no honest universal average for Rental Income, but there is a reference point: the defaults on this page produce $-387.73 (Negative — you subsidize the property each month). Replace the inputs with your own and compare — that comparison is the useful meaning of “typical”.
How do I calculate Rental Income by hand?
Cash flow = gross rent − vacancy − operating expenses − debt service; cap rate = NOI ÷ price; cash-on-cash = annual cash flow ÷ cash invested is the entire method. Work the inputs in that order — Effective rent = 2,200 × (1 − 7% vacancy) = 2,046 — and you will reach $-387.73 on the default figures, the same number this tool prints.
What happens to Rental Income if purchase price changes by 10 %?
The engine was re-run with that field moved by ten percent while everything else stayed fixed: the monthly cash flow goes across $-547.40 to $-228.05, a swing of roughly 41.2 % around the $-387.73 baseline. That ratio is the practical definition of how much this input matters.
Is the Rental Income result of $-387.73 good or bad?
Neither, on its own — the label “Negative — you subsidize the property each month” is the band this figure falls in for the example inputs, and your own inputs will place you elsewhere on the same ladder. Judge the number against your history and your alternatives, and remember that a ten-percent error in Purchase price alone moves it by ≈41.2 %.
Is Rental Income accurate?
The arithmetic is exact: Cash flow = gross rent − vacancy − operating expenses − debt service; cap rate = NOI ÷ price; cash-on-cash = annual cash flow ÷ cash invested is evaluated with full floating-point precision and every substitution is printed in the worked example. What limits accuracy is input quality and the model’s assumptions, so treat the $-387.73 result as the correct answer to the question you typed — and check the assumptions section before acting on it.
Which costs are missing from Rental Income?
Vacancy, management, capital reserves and closing amortisation are the usual absentees. The tool computes what you feed it; adding those into the expense side moves the number from marketing to operations.
What is a good cash-on-cash return?
Many investors target 8–12% pre-tax cash-on-cash. Below ~6% the levered return barely beats index funds given the illiquidity and work involved; above 15%, question the assumptions.
Is rental income taxed?
Yes, but depreciation shelters much of it in the US (27.5-year straight-line on residential). The UK taxes rental profits after allowable expenses, with mortgage-interest relief restricted to a 20% credit since 2020.
Can this tool see the numbers I type?
It cannot. There is no submission step: the calculation happens in your browser and the result disappears when you close the page. Treat the fields above as a scratchpad rather than a form.
Glossary for Rental Income
- Annual cash flow
- $-4,653 on the example inputs — a companion figure printed beside the headline of Rental Income so that no result is read in isolation.
- Cash-on-cash return
- -7.75% in the default Rental Income calculation — one of the secondary figures an experienced reader checks before trusting the primary number.
- Mortgage payment / mo
- $1,596.73 for the Rental Income worked case; it sits next to the main result because it carries context the headline leaves out.
- Monthly cash flow
- The primary output of this tool: $-387.73 for the default inputs, computed exactly from Cash flow = gross rent − vacancy − operating expenses − debt service; cap rate = NOI ÷ price; cash-on-cash = annual cash flow ÷ cash invested.
- Worked example
- The step-by-step substitution printed above, so the arithmetic can be re-derived by hand or in a spreadsheet.
- Verdict band
- The interpretation attached to a result (“Negative — you subsidize the property each month” on these inputs), which turns a bare number into a position on a scale.
- Sensitivity (±10 %)
- How far the Rental Income moves when a single input is nudged ten percent either way; the ranked list on this page is computed live from this engine.
Methodology, sources and limits
The model is published arithmetic implemented exactly as written: Cash flow = gross rent − vacancy − operating expenses − debt service; cap rate = NOI ÷ price; cash-on-cash = annual cash flow ÷ cash invested. Source of record: Standard rental-property cash-flow analysis (BiggerPockets / Appraisal Institute methodology). Any other implementation of this model should return the same figure for the same inputs. If one does not, the difference is in its assumptions — which this page prints and that one probably does not.
Treat the output as a precise answer to the question you typed: exact arithmetic, transparent formula, published source, no hidden rounding. What that buys you is reproducibility — two people, two browsers, the same arithmetic, and a printed trail from inputs to result that either of them can audit.
What to do with your Rental Income next
Re-run at your actual tax and deduction figures rather than the defaults; the gap between them is your real take-home.
This page was written for workers and employers working out what money actually arrives, and the promise is that nothing above required trust. Bookmark the tool, re-run it whenever an input moves by more than a few percent, and keep the date with the number.