"Cash flow" is the number every rental investor talks about and the number most get wrong. The mistake is almost always the same: subtracting mortgage from rent and calling the difference "cash flow." That's the number that turns a $300/mo "winner" into a $200/mo loser when the water heater dies.

Here's the actual formula — and a calculator you can run on the back of a napkin.

The full cash flow formula

Cash Flow = Gross Rent − Vacancy − Operating Expenses − Debt Service − CapEx Reserve

If any of those 5 lines is missing, you're not calculating cash flow — you're calculating "cash flow plus liabilities you forgot."

The 5 inputs, line by line

Gross Rent. Contract rent × 12. Use the actual lease, not "market" projections.
Vacancy. Use 7% as a default, 8–10% for class B/C. See our vacancy rate guide.
Operating Expenses (OpEx). Property tax + insurance + property management + repairs + lawn/snow + utilities (if owner-paid) + HOA. For SFR, OpEx is typically 35–50% of gross rent — the "50% rule" exists for a reason.
Debt Service. Principal + interest only. Not taxes, not insurance (those are in OpEx).
CapEx Reserve. The line every new investor skips. Roofs, HVAC, water heaters, flooring, and appliances all wear out. Reserve $200–$400 per door per month or 5–10% of gross rent.

A worked example

Single-family rental, $300,000 purchase, $240,000 loan @ 7%, $2,100/mo rent.

Gross rent: $25,200
Vacancy (7%): −$1,764
Taxes: −$3,600 · Insurance: −$1,800 · PM (8%): −$2,016 · R&M (8%): −$2,016 · Lawn: −$600
OpEx total: −$10,032
Debt service (P&I): −$19,170
CapEx reserve ($250/mo): −$3,000

Cash Flow = 25,200 − 1,764 − 10,032 − 19,170 − 3,000 = −$8,766/yr

That same deal calculated as "rent minus mortgage" looks like +$420/mo of "cash flow." The honest math says it's losing $730/mo. Almost every "this deal looked great on paper" story is this exact math.

The quick-screen formula (60 seconds)

Quick Cash Flow ≈ (Monthly Rent × 0.50) − Monthly P&I

This is the back-of-napkin version. It assumes OpEx + vacancy + CapEx ≈ 50% of rent (the "50% rule"). If it's negative, walk away. If it's positive, run the full numbers.

What "good" looks like

$200–$300 / door / mo — solid in 2026 with rates where they are.
$100–$200 / door / mo — acceptable if the deal also has strong appreciation.
$0 or negative — only justified by clear forced appreciation, BRRRR upside, or owner-occupied house hacks.

See our full analysis framework for how this fits into a complete underwrite.

Run real cash flow on every property you own

Havyn auto-pulls expenses, mortgage, and rent — then shows true cash flow per property and per portfolio, with CapEx reserves built in.

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