Thinking of investing in rental properties this year? Then, one tool you will want to use is the rental cash flow calculator.
The tool is also known as the investment property cash flow calculator.
Keep reading to find out what rental cash flow means in real estate investing, why investors need a rental cash flow calculator, and where you can find the best version of the tool.
Rental Cash Flow in Real Estate Investing: Definition
Rental cash flow is the difference between the monthly rental income that an investment property produces and the monthly rental expenses associated with it. In other words, it is the amount of money that you make (or lose) from your rental property after having paid all the costs that come with operating it.
Calculating cash flow for rental property helps real estate investors determine whether or not a rental property is a good investment to buy. So, if you are considering investing in rental properties, it is crucial for you to understand how to calculate cash flow.
Let’s take a look at the cash flow formula:
Cash Flow = Monthly Rental Income – Monthly Rental Expenses
- The Monthly Rental Income will typically consist of the monthly rent payments that you collect from your tenants. But there may also be other sources of income that you would need to include, such as revenue from laundry facilities, parking space rental, or whatever other services that you provide for your tenants for a fee.
- The Monthly Rental Expenses will consist of all the costs incurred while running your rental property. They include utilities, mortgage payments, property taxes, repairs, and so on. Rental expenses vary significantly from one property to another, which makes it challenging for some investors to clearly identify them.
You may ask, “How much should rental properties cash flow?,” or, “What’s considered a good cash flow rental property?” Well, we can tell you this: Positive cash flow is what all property investors aim for. Having a positive cash flow investment property means that your rental income exceeds your rental expenses, which means that you are making a profit.
Rental Cash Flow Calculator: A Must-Have Tool for Investors
Calculating cash flow for a single rental property that you already own is relatively easy. If you keep records of your rental income and rental expenses, then using the cash flow formula should be straightforward: all you need to do is subtract the expenses from the income.
However, challenges arise when you are looking at multiple investment properties for sale and deciding which one to purchase. In that case, you must gather very large amounts of data, prepare countless spreadsheets on Excel, and compute the cash flow for each property individually – UNLESS you use a rental cash flow calculator, also known by its other names: rental property cash flow calculator, cash flow calculator for rental property, or investment property cash flow calculator!
The tool is a specific type of rental property calculator that is designed to help real estate investors calculate cash flow quickly and efficiently, and find positive cash flow properties in their market of interest. What it does is it performs real estate market analysis and rental property analysis to estimate the costs related to owning a rental property, as well as the rental income that you can expect from the property. It then automatically calculates the cash flow which the property will generate based on that data.
The rental property cash flow analysis is done not only for one but for thousands of investment properties listed for sale. Using the cash flow rental property calculator, you can therefore easily find positive cash flow real estate properties to buy.
Where to Find the Best Rental Cash Flow Calculator
The best rental cash flow calculator out there is available at Mashvisor. Mashvisor’s rental property calculator uses nationwide big real estate data and rental comps from actual investment properties to calculate the cash flow of any rental property in the US housing market. It is done thanks to predictive analytics and machine-learning algorithms. You can, therefore, use the calculator to find, analyze, and compare rental properties in any city or neighborhood of your choice.
Let’s take a detailed look at what Mashvisor’s rental cash flow calculator does for real estate investors:
1) Estimates the Monthly Rental Expenses
Mashvisor’s rental cash flow calculator provides you with accurate estimates of all the possible costs and expenses associated with buying and renting out an investment property, whether as a traditional (long-term) rental or an Airbnb (short-term) rental. The estimates are based on data from the local housing market and the neighborhood. The rental property expenses are broken down into two categories:
- One-time startup costs: Costs that you will only have to pay when acquiring the property. They include:
- Property price
- Inspection costs
- Repair costs
- Furniture & appliances expenses
- Closing costs
- Recurring monthly expenses: Costs that you will have to pay on a regular basis once you own the property. They include:
- Mortgage payments
- Property maintenance
- Property management
- HOA dues
- And more.
The great thing about Mashvisor’s rental cash flow calculator is that it takes into account your method of property financing (cash or mortgage loan). So, if you are planning to finance your property with a mortgage loan, you can select the mortgage type that you want, and it will recalculate the monthly mortgage payments and any other related costs.
Note that the costs and expenses mentioned above are all customizable, meaning you can adjust the numbers to fit the investment property analysis to your particular situation. Any changes you make to the numbers will immediately be reflected on the cash flow rental calculator to provide you with the most accurate results.
2) Estimates the Monthly Rental Income
Mashvisor’s rental cash flow calculator also gives you an estimate of the rental income that you can expect from your property in the case of long term renting and in the case of short term renting. In fact, the rental income generated by a traditional rental property will be very different than that of an Airbnb property.
Mashvisor’s rental income estimates are based on the traditional rental rate and the Airbnb rental rate prevailing in the neighborhood where the property is located in, meaning they are highly accurate and reliable. As a result, you will be able to figure out which rental strategy will yield a higher rental income for your subject property.
Here also, the cash flow calculator rental allows you to adjust the rental rate to achieve a better estimate for your property.
3) Calculates the Rental Cash Flow
As you would expect, Mashvisor’s rental cash flow calculator computes the cash flow that the rental property will generate. It subtracts all the rental expenses from the rental income to provide you with a real estate cash flow forecast. Using the said tool, you can, therefore, calculate cash flow before you even purchase a property to ensure that you don’t end up with negative cash flow. Remember, the best cash flow investments are positive cash flowing real estate properties.
4) Projects the Return on Investment
The unique thing about Mashvisor’s rental property calculator is that it calculates more than just the rental cash flow. It also provides an estimate of the return on investment that you should expect from a property, based on traditional and predictive analytics. It gives you the following real estate metrics for any investment rental property for sale in the US housing market:
- Traditional and Airbnb cash on cash return
- Traditional and Airbnb cap rate
- Traditional and Airbnb occupancy rate
As you can see, the return on investment is shown for both rental strategies, which allows you to determine which strategy is optimal for your rental property.
We can, therefore, say that Mashvisor’s rental property calculator not only works as a rental cash flow calculator, but also as a cash on cash return calculator, a cap rate calculator, and an Airbnb calculator. Thanks to the tool, investors are not only guaranteed to find properties with positive cash flow but also with high returns.
A rental cash flow calculator is one of the indispensable real estate investment tools that you need to be equipped with if you are considering investing in rental properties in 2022. Using the tool, you will be able to easily find the best cash flow investment properties in the US housing market and grow your investment portfolio in no time!
Sign up for a 7-day free trial with Mashvisor now to get your hands on our rental property calculator.