Do the Numbers Add Up?
May 2011
When you size up a rental property, you should aim to clear at least $300 a month. Financing is one variable. If you pay cash, you’ll have zero financing costs. Technically, you should treat the forgone investment income on the money you’ve tied up as an expense. But with current interest rates so low, what you earn on a rental is likely to be much higher. Another variable is whether you hire a management company or manage the property yourself, including finding tenants and collecting rents.
Read more here about how to be a landlord.
Use our calculator below to help determine if a rental property deal can work for you.
*all values are monthly
CASHFLOW SPREADSHEET
INCOME FROM RENT
Property Taxes
Insurance and Security
Utilities and Water (zero if tenant pays)
Management fee (figure 10% of the rent)
Reserve for maintenance (figure 10% of the rent)
Vacancy reserve (5% of the rent)
TOTAL EXPENSES
NET OPERATING INCOME (income from rent minus expenses)
Financing costs (principal and interest, if applicable)
NET TOTAL CASH FLOW
(net operating income minus financing costs)