REAL ESTATE INVESTMENT CASH FLOW CALCULATOR HOW TO

How to Calculate Cash Flow and Cash-on-Cash ROI for a Rental It’s all part of the due diligence required to find the best value and best deals possible. Obviously, the properties with higher cap rates are going to be more attractive investments. A 10% cap rate means you can potentially get a return on your investment (ROI) in roughly 10 years if you bought the property entirely in cash.Ĭap rate is really useful for comparing similar real estate opportunities. Cap rates for commercial properties can be as high as 10% or more. Most investors look for a cap rate of at least 6%, but if you’re in an expensive city with inflated real estate prices, you might be looking at cap rates of around 4% or even less.Ĭap rates tend to be smaller for Single Family Rentals (SFRs) and smaller Multi-Family Rentals (MFRs) compared to apartment buildings and commercial properties. This tool will allow you to run hypothetical scenarios to better assess your potential cash flow with various assumptions.

Capitalization Rate can be easily calculated by dividing your annual NOI with the current market value of the property.Ī higher cap rate means higher income potential. One of the most popular ways to evaluate and compare the profitability and potential returns of different real estate investments is by looking at a rental property’s Capitalization Rate or Cap Rate. By leaving out the variables of mortgage terms and payments, it’s easier to accurately compare the profitability of different real estate rental properties on an apples-to-apples basis. Net Operating Income is one of the first things creditors and lenders look at to determine a rental property’s income generation potential. Property management fees (when you are not managing the property yourself)ĭo take note that operating expenses do not include your mortgage payments if you’re borrowing money to purchase the property.But larger multi-family homes and commercial properties can also generate additional income by charging for:Ī rental property’s operating expenses typically include: A good chunk of a rental property’s gross operating income comes from rental and lease payments.

Real estate investment cash flow calculator