Calculate your true net cashflow from any rental property, after mortgage, taxes, social charges and deductions. Know your real return before you invest.
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Cashflow is the lifeblood of rental investing. It is the net income remaining after all expenses: mortgage payments, property taxes, insurance, maintenance, vacancy losses, and income taxes. A property with strong cashflow generates passive income every month, while a cashflow-negative property requires ongoing capital injections.
The cap rate (capitalization rate) measures a property unlevered yield: annual net operating income divided by purchase price. According to Zillow, US cap rates range from 3-5% in high-demand coastal markets to 8-12% in Midwest and Sun Belt cities. A good rule of thumb: if the cap rate exceeds your mortgage rate, the property is likely to cashflow positively.
Tax treatment significantly impacts real returns. In the US, rental property owners can deduct mortgage interest, property taxes, insurance, repairs, and depreciation (27.5 years for residential). These deductions often shelter a large portion of rental income from taxes, improving your effective cashflow substantially.
Related tools: Property ROI Calculator, Rent vs Buy Calculator, Mortgage Simulator