To succeed as a landlord you need to make more money than you spend on your property. To help with that I created a Rental Property Cash Flow Calculator you can use to quickly put some numbers together to see whether you will succeed or not!
You can use this on your current property, to see how you’re doing, or you can use this to quickly get an idea if a potential property you are considering purchasing will cash flow.
Now any serious Real Estate investor typically already has their own set of goto spreadsheets on their home computer that helps them do the required diligence, but sometimes you are out and need a quick answer.
That’s where this tool fits into your toolbox!
As long as you have a smartphone and internet access you can quickly load up this Rental Property Cash Flow Calculator to see how a property looks to you.
Or better yet, if you’re out looking for partners in a rental property you can load up the numbers in front of them and show them how well (or how poorly) a property would do.
Cash Flow Math
In an article I wrote quite a while ago I went through the math that new landlords often miss out on when it comes to actual cash flow on a property.
If you want to read the article you can find it here >>> Do You Really Understand Rental Property Cash Flow.
The Coles notes version of this is rookie landlords forget about maintenance, vacancy and even property management which kicks them in the rear hard at the end of the day. (Read the article for more breakdown on this and the associated math).
Further shortening the math it simply comes down to your income minus your expenses and this calculator will do that for you and it even lets you experiment what your overall cash flow could be if you bump up the rents.
And raising rents might be the first thing you will want to consider if you suddenly find out you’re losing money or simply breaking even!
Need to know how to raise rents without pissing off your tenants? Well I just happen to have an article on how to do that too>>>>How To Raise Rents Without Raising The Roof.
The Rental Property Cash Flow Calculator
I’ve babbled quite a bit about this Cash Flow Calculator already so I guess I should pop it in here so you can play with it.
But before I do, two more notes…
Note One. Further down I’m adding in a bunch of additional details, notes and tips to help you make the most of this. For the first time you use the Rental Property Cash Flow Calculator tool, even though it’s fairly self explanatory, you may want to read them first.
Note 2. If you find this tool handy, and I am sure you will, you won’t want to read through all this and have to scroll down to the calculator every time you use it, so here is a direct link to the Rental Property Cash Flow Calculator Tool you can bookmark for future use without all the details.
Rental Property Cash Flow Calculator Tool
*disclaimer This calculator is a quick handy tool to ESTIMATE cash flow. You’ll need to verify all numbers, totals and complete all your due diligence to verify accuracy of all totals, estimates and assumptions this calculator provides. The Educated Landlord and associated contributors are not liable for any errors, omissions or inaccuracies that may cause a property that appears to cash flow positively to be a negative.
Bill Biko – The Educated Landlord
Additional Notes About The Rental Cash Flow Calculator
More Than Four Rental Units
Due to space constraints and to make this tool useable to the most amount of landlords I restricted the gross rental income section to four rental units.
If you have five, six or even more units in a single property or building, you may want to add all the units together and lump it into Monthly Gross Rent Unit 1.
Or if you could lump same priced units together if you have two apartments in an eight unit apartment at $700, two at $650 and the remaining four at $600 you could fill in Monthly Gross Rent Unit 1 as $1,400 (2 x 700), Monthly Gross Rent Unit 2 as $1,300 ($650 x 2) and Monthly Gross Rent Unit 3 as $2,400 ($600 x 4).
If there is enough demand for a bigger form allowing more units I will create a new tool to assist with that.
Taxes & Insurance
You may pay your taxes or insurance yearly as a lump sum. The tool bases it’s calculation on a monthly basis so you will need to take your lump payments and divide it by 12 to break it into a monthly total.
In some cases your taxes are lumped in with your mortgage payment. If that’s the case, it’s up to you whether to break them out (more work) or simply lump it in with the mortgage payment (less work).
Monthly Mortgage or LOC Payments
If you’re using a variable rate or adjustable rate mortgage (ARM) your payments may vary over time. To help safeguard or cushion yourself it may be necessary to pad your payment numbers a bit on the upside to ensure you stay cash flow positive.
As in, if your monthly mortgage payment is $600 but you believe it may increase by $25 within the next year, use $625 as the mortgage payment amount. If it does, you already know your numbers, if it doesn’t you simply next soem bonus cashflow rather than getting disappointed at the end of the year and finding it lower.
I included LOC or Lines of Credit here as well. If you have a LOC in place of a mortgage or if you are making payments on a LOC to provide additional financing you can use the number(s) here either on it’s own when in place of a mortgage or by adding the mortgage and LOC payment together.
Again if you expect rates on the LOC to rise or you expect to pay more on the LOC use the calculator to experiment and find the sweet spot that will work for you.
Vacancy Rates
You can usually find your local vacancy rates through local apartment owner groups or through the local Real Estate Associations. These numbers are often three to six months behind, but give you a solid place to start.
If you’re a cautious landlord, you may want to double the vacancy rates to further protect yourself and provide additional cash flow cushions. As an example if you have determined current vacancy rates for your area are 3%, double it to 6% and worst case you have additional money saved up in your vacancy reserve to cover a vacant stretch and best case you have an extra bit of cash flow at the end of the year!
Maintenance Rates
Danger, Danger, there is no right answer for maintenance rates!
Each and every property is unique and as the owner it will be up to you to determine what this number should be. I defaulted to 5% but if you just purchased the property and did a significant rehab on it as part of a BRRR strategy (Buy, Renovate, Refinance, Rent) your initial maintenance costs may be considerably lower for the next several years.
On the other end, if you know you have a $5,000 furnace expense coming up in two years that would add $208 per month to maintenance on it’s own ($5,000 / 24 months = $208.33 per month) and 5% may not cut that.
Use the tool to experiment and remember an Educated Landlord errors to the side of safety, so go higher to protect yourself and your investment to be safe.
Property Management Costs – Percents & Flat Fees
Many property management companies use a flat percentage of the rent to calculate what they charge you. They also may have additional charges for showings, lease signings, walk throughs, inspections or even for just talking to you!
Use the first area, Property Management Costs (as a percent) to fill in the monthly percent you are charged (typically 8-12% but often negotiable).
Then use the second area, Property Management Costs (Flat Fee Costs) to fill in any additional flat fee services you may have to pay. If this is a brand new property this number may be more initially and many of the fees will be one off to get that first tenant in.
Additionally for that second space if you are paying for lawn services, snow removal services, HOA or condo fees or other monthly fees you can lump them in here as well.
In future calculators and depending on feedback I may adjust the calculator and add in additional options, so if you have feedback, get yourself heard and leave a comment at the bottom!
Rental Property Cashflow Calculator Feedback
I need feedback, from you! Is this Rental Property Cash Flow Calculator helpful?
Does it make your job easier as a landlord?
Are you able to use this to make quick assessments?
What should I add?
What do you like, dislike or simply don’t understand?
If you have any of these questions you can answer or have any other feedback at all, please leave me a comment below and let me know and I will do what I can to answer, adjust or even fix the calculator so it can help the most amount of landlords possible.