Work a rent check down to effective gross income, net operating income, and monthly cash flow, and see the slice of rent a lender will actually count.
Estimate only, runs entirely in your browser. SealedFolio tracks real income and expenses per property automatically. See how.
What an underwriter typically credits from a signed lease when the property has no filing history yet.
Rental income is more than the rent check. To know what a property really earns, work down from gross to cash flow:
For return metrics on top of income, use the cap rate and cash-on-cash return calculators. To see what actually lands in your account after the mortgage and expenses, run the rental property cash flow calculator. For taxes, the Schedule E calculator.
Monthly rent. The rent on the signed lease, not the number in the listing. If a unit is vacant, use what a comparable unit down the street actually rents for today.
Other monthly income. Parking, laundry, storage, pet rent, and paid amenities. On small multifamily this is often the difference between a deal that clears and one that does not, and most people forget it entirely.
Vacancy rate. The share of a year you assume the unit earns nothing. Five percent is about two and a half weeks. Set this before you fall in love with a property, not after.
Operating expenses. Everything it costs to run the building whether or not there is a loan on it: property taxes, insurance, repairs and maintenance, management fees, HOA dues, and any utilities the landlord covers. A capital reserve belongs here too, because the roof is going to need replacing on a schedule nobody controls.
Annual mortgage payment. Principal and interest only. If taxes and insurance are escrowed into your payment, do not enter them twice. Need the payment figure first? Run the rental property mortgage calculator.
Effective gross income. Gross income after the vacancy haircut. This is the honest top line.
Operating expense ratio. Operating expenses divided by effective gross income. Treat it as a sanity check on your own inputs rather than a score.
Net operating income. Effective gross income minus operating expenses, before any financing. NOI is the number cap rate is built on, and it is why two investors can look at the same building and disagree about the price.
Cash flow. NOI minus the mortgage. Pre-tax, and not the same as taxable income.
Here is the calculator's default scenario written out, so you can see where the money goes at each step.
The operating expense ratio here is 39%, which is inside the normal band. Notice how much distance sits between the $30,000 headline and the $3,400 that actually reaches you. That gap is the whole reason to run the numbers before you make an offer.
Now change one thing. Push vacancy from 5% to 10% and cash flow drops to $1,900 a year. One extra vacant month is most of your profit on a property like this, which is why the vacancy input deserves more thought than it usually gets.
If you are analyzing a property you do not own yet, you are guessing at four of these lines. Common planning ranges, used as starting points and replaced with real quotes as soon as you have them:
Property taxes and insurance are the two you never have to guess at. Pull the tax bill from the county assessor and get a real insurance quote for the address. Both can swing a deal by more than every assumption above combined, and both take about ten minutes to verify.
Search for a rental income calculator and a good share of what comes back are underwriting worksheets from the agencies and the mortgage insurers. That is because "rental income" means something narrower to a lender than it does to you, and the number they credit is rarely the number on the lease.
For a property with no filing history, the common convention is to count 75% of the gross rent from a signed lease or an appraiser's comparable rent schedule. The other 25% is held back for vacancy and maintenance. That is the figure in the lender view above. It is a screen, not a promise, and programs differ, so treat it as the conversation starter with your loan officer rather than a commitment.
Once the property has been on a tax return, the method changes. Underwriters work from your filed Schedule E and add back the items that never cost you cash or that they count elsewhere, depreciation being the big one. That path is worked through in detail on the Schedule E calculator, including the add-back view.
If you are qualifying on the property rather than on your own income, the ratio that matters is NOI against the mortgage payment. The mortgage calculator covers how DSCR lending works and what coverage level is typically required.
Cash flow and taxable income rarely match, and the reason is usually depreciation. Your mortgage principal is cash out the door but is not deductible. Depreciation is deductible but costs you nothing this year. It is normal for a property to put money in your pocket and still show a loss on paper.
For the filing view, the Schedule E calculator maps each entry to its form line. The depreciation calculator gives you the year by year figure on a 27.5 year schedule, and the guide to rental property tax deductions covers what else you can claim against this income.
Start with gross scheduled rent, meaning monthly rent times 12 plus any other income like parking or laundry. Subtract a vacancy allowance to get effective gross income, then subtract operating expenses to get net operating income, and finally subtract the mortgage to get your pre-tax cash flow.
Gross rental income is all the rent and other income a property collects. Net rental income, usually called net operating income, is what remains after vacancy and operating expenses but before financing. Lenders and the IRS care about different versions, so this calculator shows each step separately.
No. Net operating income stops before the mortgage, which is what makes it comparable across properties with different financing. Cash flow is what is left after the mortgage payment comes out of net operating income. Two identical buildings can share an NOI and have very different cash flow.
For a property with no filing history, agency underwriting commonly counts 75% of the gross rent shown on a signed lease or an appraiser's comparable rent schedule, with the remaining 25% held back for vacancy and maintenance. If the property is already on your tax return, the lender works from your Schedule E instead and adds back items like depreciation. Programs vary, so confirm the method with your lender.
Five to eight percent is the common planning range for a stable long term rental, which is roughly two to four weeks of turnover per year. Use the higher end for student housing, seasonal markets, or a unit you expect to turn every year, and the lower end only if you have real leasing history to back it up.
Operating expenses divided by effective gross income is a quick sanity check on your inputs. Most residential rentals land somewhere between 35% and 45% once taxes, insurance, maintenance, management, and reserves are all in. A ratio far under that usually means you left something out rather than that you found a bargain.
Rent, advance rent, lease cancellation payments, tenant paid expenses, and the value of services received in place of rent all count as rental income on Schedule E. This calculator estimates the cash picture rather than the tax picture, so use the Schedule E calculator for the filing view.
Rental Cash Flow Calculator
Monthly cash flow with the 1% and 50% screening rules
ToolRental ROI Calculator
Total return with appreciation and equity paydown
ToolSchedule E Calculator
Taxable rental income and the lender add-back view
Tracking a portfolio instead of screening one deal? SealedFolio keeps income and expenses per property on your own machine, so these figures come from real numbers rather than estimates. The rest of the free set is in the calculator library.