Rental Property Cash Flow Analysis: A Worked Example

How to calculate rental property cash flow

Planned gross rent minus vacancy and collection loss gives effective rental income. Subtract operating expenses to estimate net operating income (NOI). Subtract debt service and your capital reserve allowance to estimate cash available before income taxes. State your definitions because accounting reports may treat reserves and capital expenditures differently.

Walk through the monthly example

The $700 expense assumption must be replaced with actual taxes, insurance, management, maintenance and owner-paid utilities. Avoid counting the same repair or reserve twice.

How to stress test a rental property investment

At a 12% vacancy/collection allowance, effective income in this example falls to $1,760 and cash remaining falls to $60. If operating expenses also increase by $100, the result becomes negative $40. These are scenarios, not probabilities.

The Census Bureau reported a 7.3% national rental vacancy rate in Q2 2026. That survey estimate measures market vacancy; it is not a recommended loss allowance for a particular rental. Property turnover, concessions and nonpayment can affect collected income differently.

Change one assumption at a time to see its effect, then combine changes in a downside case. Keep vacancy and collection loss separate when the source data allows it. Recalculate taxes, insurance, repairs and debt service using property-specific evidence rather than a national average. Document the point at which modeled cash available becomes negative; that threshold describes your assumptions, not the probability of a loss.

Replace assumptions before acting

Use local rent comparables, actual lease terms, a current insurance quote, the applicable tax estimate and written financing terms. Include known capital work separately. Keep a dated base case and downside case so you can see which changes affect the result.

Appreciation is not rent collected. Keep expected resale value separate from operating cash flow when deciding whether a property can meet its ongoing obligations.