How to Calculate Cash Flow on Rental Property (Calculator Included)
Published: 2025-12-12
Status:
Analyzed
Published: 2025-12-12
Status:
Analyzed
Predictions from this Video
Incorrect: 0
Prediction
Topic
Status
New A-class construction real estate will have low repair and capital expenditure (capex) expenses for at least five to ten years.
"If you're buying an A-class brand new construction, your expenses, your repairs, your capex are going to be pretty low, probably for five or 10 years at least."
Pending
Real estate properties are expected to experience one month of vacancy every 1-2 years.
"It's pretty normal to have one month of vacancy every other year or maybe even every year depending on the market."
Pending
A minimum of 5% of gross rental income should be budgeted for vacancy, capex, and repairs/maintenance, potentially increasing to 10% per line item depending on the property.
"I think 5% should be the bare minimum. If you don't have any vacancy, great. that's just a bonus that you're getting more rental income back in your pocket. But I think 5% should be the bare minimum and then you can kind of increase it to there. So depending on the property, like sometimes I'll go as high as 10% to save per line item. So that's 10% for vacancy, that's 10% for capex, 10% for repairs and maintenance."
Pending
Property taxes are expected to increase everywhere.
"property taxes everywhere are going up. So, I'm going to put in $2,400 just because I think it makes sense to just make sure."
Pending
8% of gross rental income should be allocated for repairs and maintenance for the described 135-year-old duplex in Western Michigan.
"I think I'm going to do 8%."
Pending
If the $18,000 renovation is not completed, repairs and maintenance for the described duplex would likely be around 15% of gross rental income.
"if I wasn't going to invest that $18,000 I mentioned earlier, I'd probably bump this up to like 15%. If I was just going to buy this and hold on to it and not make any improvements, I would."
Pending
8-10% of gross rental income should be allocated for vacancy on the described duplex in a B-minus area.
"I'd probably do 8 to 10% on this, too."
Pending
Dishwashers in rental units will likely need replacement every 7-10 years.
"Appliances famously don't last that long. If you have four units, make sure that you're considering the fact that every seven to 10 years, you're probably going to have to replace that dishwasher"
Pending
The duplex, at an asking price of $350k, is predicted to generate $388 in monthly cash flow (4% cash-on-cash return) and an 8% annualized return.
"It comes out at $388 in monthly cash flow, which amounts to I'm rounding up a little bit, but basically a 4% cash on cash return... The Bigger Pockets calculator tells us it's about an 8% annualized return"
Pending
Dave's investment strategy requires real estate deals to achieve at least a 12% annualized return, surpassing the stock market average by several percentage points.
"When I look at deals generally, I say I need at least a 12% annualized return. That's handedly beating the average for the stock market, and I want to at least beat the stock market by a few percentage points."
Pending
If the duplex is purchased for $300k, it is predicted to generate $630 in monthly cash flow (7% cash-on-cash return) and a 16% annualized return.
"So, if I drag this down to 300 grand, I would get a 7% cash on cash return, significantly better. So, that's $630 a month. And the annualized return jumped from 8% to 16%."
Pending
The duplex, purchased at $300k and accounting for an additional $100/month in general expenses (e.g., snow plowing), is confidently predicted to achieve at least a 6.5% cash-on-cash return and a 15.6% annualized return.
"I went back in and added another hundred bucks a month in just like general expenses for probably plowing something like that. still at six and a half percent ROI, which I like. And... I feel confident I get at least a 6 and a half% cash on cash return. That's good. of 15.6% annualized return. That's good."
Pending
If the described duplex achieves 3-4% appreciation (instead of the underwritten 2%) due to being in a good growing market, it is predicted to yield a 20% annualized return.
"I underwrote this deal with just 2% appreciation. this happens to be a B9 in this neighborhood but in a very good growing market and so maybe I get 3 or 4% appreciation what happens then I probably get you know a 20% annualized return"
Pending
The real estate market is predicted to be flat, with little to no appreciation for the next 1-2 years.
"appreciation might not happen for the next year or two. Like we might be in a flat market."
Pending
Dave's cash-on-cash return targets are 3-4% for A/A+ neighborhoods, 6-8% for B- neighborhoods, and 10%+ for areas with no expected appreciation.
"I would buy a 3 or 4% cash on cash return deal. If it's in an A or A+ neighborhood because I'm going to get other benefits. If I'm in this B minus neighborhood, six 78 is probably the minimum that I would take on that kind of deal. And if I was in a an area that I didn't think would appreciate at all, I'd probably want 10 10 plus."
Pending