How rental cash flow is calculated
Monthly cash flow = collected income − operating costs − capital reserves − debt payment
Collected rent accounts for vacancy. Taxes and insurance are entered annually and converted to monthly costs. Maintenance and replacement reserves are percentages of scheduled rent, while management is a percentage of collected rent.
NOI and cash flow answer different questions
NOI subtracts ordinary operating expenses from effective income. It excludes financing and capital reserves. Cash flow goes one step further and subtracts both from NOI. A positive NOI alone does not mean a property pays for itself.
Debt service coverage
Our DSCR is annual NOI divided by annual principal and interest. A value below 1 means NOI does not cover modeled debt service. Lenders may use a different definition, such as rent divided by PITIA, and different underwriting adjustments.
Stress-test the assumptions
Try lower rent, more vacancy and a higher insurance estimate. Save each scenario with a clear nickname. This first-year model does not forecast rent growth, appreciation, tax benefits or a future sale.