How I Calculate My $6,000+ Per Year Rental Property Cash Flow aka Net Operating Income

Rental Property Cash Flow Analysis of Net Operating Income

It’s time once again to do our annual rental property cash flow analysis, aka calculate our Net Operating Income (NOI). To see previous years, see the link at the bottom.

If you’re like me and you have a rental property it’s wise to do an annual analysis to see how well your property is performing. I perform this quick exercise once a year and it helps me make decisions about the future of my rental property.

Should I get more properties? Should I sell this one or refinance the mortgage or pay off the mortgage? These questions are easier to answer when you understand how successful your property is from a cash flow perspective.

How to Calculate Rental Property Cash Flow or NOI

As you’ll see below, I don’t overcomplicate things. I simply gather up the rents collected and subtract any expenses that I’ve incurred that I can attribute to the property. The result is my annual cash flow.

Since I do all of this out of one checking account at Chase, I can quickly log in and download last year’s data into a spreadsheet and sort it all out.

Annual Net Operating Income = Annual Rent Collected – Annual Expenses
Expenses I have on this property are what you’d expect: mortgage, HOA, taxes, insurance, and repairs. This particular property is a townhome and it was our first home – we converted it to a rental property back in 2012.

If you have multiple properties, it might be helpful to use a more sophisticated expense tracking tool. I recommend the tools from our long-time partner Cozy.

And if you are analyzing a rental property for purchase, you will have to make some estimations on these numbers. For instance, you might want to reduce your expected rent collected by a vacancy rate of 10%.

Okay, let’s look at my specific numbers for last year:

2019 Cash Flow (aka NOI) Analysis

2019 Rent Collected

  • 2,200.00 January Rent
  • 2,200.00 February Rent
  • 2,200.00 March Rent
  • 2,200.00 April Rent
  • 2,200.00 May Rent
  • 2,200.00 June Rent
  • 2,200.00 July Rent
  • 2,200.00 August Rent
  • 2,200.00 September Rent
  • 2,200.00 October Rent
  • 2,200.00 November Rent
  • 2,200.00 December Rent

Total Rents Collected $26,400.00 by check

Isn’t that the most beautiful thing you’ve ever seen? Ha! I kid. But that’s a nice, clean rental revenue table. Our best year of rents collected yet. We raised the rent slightly last year and it’s nice to see a full year of collections at the new rate. We’re blessed with an excellent tenant who pays this on time by check each month.

And, unlike last year we had no interruption due to major incidents forcing a loss of rent. Everyone’s happy.

2019 Expenses Paid

Let’s dig into the expenses. After all, no matter how much rent you collect, your rental property is only as good as its actual cash flow (after expenses).

In 2019 we still had a mortgage on this property so you’ll be able to see what we paid in principal and interest below. HOA dues are relatively high because it’s a townhome and the dues cover the outside maintenance and the roof.

As a reminder, we purchased/built this townhome new in 2007 (it was our first home) and so maintenance has historically been very low. We pay our own property taxes directly at the end of the year. We stash these savings in a high-interest savings account.

  1. $10,108.44 Mortgage Payments for 12 Months
  2. 6,891.72 Property Taxes for 2019 (down $442 from 2018)
  3. 2,520.00 HOA Dues for 12 Months (up $420 from 2018)
  4. 865.00 Insurance (Statefarm Condo Policy)
  5. $14.00 Christmas Gift for Tenant
  6. 0.00 Repairs & Maintenance!

Total Expenses Paid $20,399.16

I was disappointed our HOA decided to raise the fee, but that’s one of the downsides of owning a townhome rental property.

However, beyond the HOA increase, our expenses were great! Insurance went down a bit, property taxes dropped, and we didn’t have a single repair! I told you our tenant was awesome.

Total 2019 Cash Flow or Net Operating Income = $6,000.84

And there it is. As a result of record rents collected, and one of our lowest years for expenses on record, we’ve hit our highest recorded cash flow in the history of the property! $6,000 in cash flow! Boom!

Our cash flow / net operating income through the years:

  • 2019: 6,000.84
  • 2018: 4,318.35
  • 2017: 5,929.24
  • 2016: 1,933.72
  • 2015: 3,158.47
  • 2014: 2,104.44
  • 2013: 4,256.41
  • 2012: (53.93)

What’s Next for 2020?

So what’s ahead for us and this property? So far we haven’t had any ill-effects from the COVID-19 crisis. I’ve checked with the tenant and they are doing fine, able to make their rent payment.

Two big things I expect to deal with in 2020:

1. Renewing the lease. Our lease with the current tenant runs though August of 2020. Therefore, we will have to draw up a new lease renewal agreement. I will likely add an additional $25 (the minimum increase) to the rent.

2. Paying off the mortgage. We actually already did this as of February 2020. The mortgage has been paid off and we’ve stopped the automatic payment. This will have a massive effect on our 2020 cash flow.

That’s about it. I’ll continue to invest some additional cash into PeerStreet, the crowdfunding platform, which you can read more about in my full review.

Looking for your first rental property? Check out our How to Find Rental Properties guide or start your property search with our turn-key rental properties partner Roofstock.

Do you have a rental property? If so, how did yours do this year? If not, have you ever considered it? Do my results give you confidence or pause?

Photo by Isaac Smith on Unsplash

To see previous year’s click show

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About Philip Taylor, CPA

Philip Taylor, aka "PT", is a CPA, blogger, podcaster, husband, and father of three. PT is also the founder and CEO of the personal finance industry conference and trade show, FinCon.

He created Part-Time Money® back in 2007 to share his advice on money, hold himself accountable (while paying off over $75k in debt), and to meet others passionate about moving toward financial independence.


    Speak Your Mind


  1. Great post! Definitely got me thinking about making an investment in a rental property. A little extra cash flow could never hurt!

  2. Great post Phil, you’ve done well here! I hope it has even helped you further with regard to Uncle Sams part. That’s the often over-looked benefit of real estate investing, oh and the increase in appreciation. Great post!

  3. says

    Hi Phil,
    Apologies if you’ve covered this in the past but what’s your gross/net yield on your rentals? I’m looking at arranging my own (here in London,UK) but it’s starting to look like a hell of a lot more effort than it’s worth….stock market returns look higher and with less admin!

    • Philip Taylor says

      I just have the one property. So, what you see above is it. We originally put down 41k as a down payment on this property. So, the $5,929 we made in cash flow this year represents a 14% annual return on that money. What I like about having real estate is the diversity it gives me from the market. A REIT could provide a similar feeling without as much risk. I also use a site called Peerstreet to invest this way.

  4. Jason Cabler says

    I paid cash for a rental property through my self directed IRA almost 5 years ago, and it’s been awesome! I have a property manager who takes care of everything so I literally spend only 2-3 hours a year dealing with it. I wish I had 10 more!

    I’ve had the same tenant since the beginning and repairs are usually minimal, so the cashflow is excellent! I’m reinvesting the rent money in stocks and mutual funds to juice returns and eventually build up enough for the next property.

    I wrote a series of posts on my adventures with buying my first property which you can find here:

  5. David Domzalski says

    Hey PT,

    I love this post. My wife and I used to be real estate agents, my in-laws own rentals, and we want to buy our first rental in 1 to 2 years. So, I appreciate your analysis.

    To answer your question, I’d go with the refi and get another property. I’d go for that over the stock market. Is this your only rental? Which way are you leaning — rental, debt payments or stocks?

    Thanks for sharing,


    • Philip Taylor says

      Hi David, thanks for commenting. Yes, this is our one and only. We’d like another at some point but don’t have the time to find something. I’m leaning towards transferring the debt over to the personal mortgage advanced payment as it’s the easiest, no-brainer move (once we have the cash out).

  6. Thanks PT for the mention!

    People look at ROI but often forget about ROE (return on equity). Like in your situation, you can have an amazing ROI but a terrible ROE.

    For a personal residence, I completely understand the idea of paying it down to live debt free. But, for a rental property or other investment, I believe it’s best to make equity work for you to maximize your returns.

  7. Hey PT – great article, and good job with your record keeping on your rental. With regard to pulling cash out versus repaying the mortgage, that just depends on your goal for this portion of your investments – because although you have wealth “tied up” in this home it’s still that – wealth, and it increases with every dollar you amortize on the mortgage principal. Also, the 50% appreciation you’ve had isn’t too shabby either. Keep up the good work, and thanks for sharing your thoughts with us.

  8. Joseph Hogue says

    To be cash flow positive with some major expenses is a big win for rental real estate, especially to be cash flowing for several years in a row.

    I’d say go with the cash out refi but don’t feel like you need to take out all your equity. Only take out enough to the point that your payments will bring you to around cash flow balance but not negative (on a three-year average accounting for expenses). Apply the cash out to anything high interest and investments. If you’re considering adding more properties, make sure you have the time (and sanity) to manage the additional work. With so much of your wealth in property, maybe it would be better to diversify into more passive investments.

    Great post, love following these.

    • Philip Taylor says

      Thanks for the encouragement, Joseph. We definitely look at this whole project as a win. Heck, it’s allowed me to create some fun content for this blog too.

      Good conservative advice on the refi. About $30-40k is about all I could stomach. That would bring the equity down to $140k. With a $4k cash flow expected in ’17, we’d be looking at closer to ~3.0% return for this property.

  9. Great post Philip, thanks for sharing this, great read.

  10. DaveyPockets says

    Man congrats! Just started year one of a real estate business myself and it is so cool to see you cash flowing! Don’t forget to factor in home office deductions, mileage on your car, half of on your meals, and depreciation and you return is much higher than 10%!!

  11. Philip — Those are good numbers!
    I have learned maybe the best investment is by getting a quality tenant, and it sounds like you did!
    — Phillip H.

  12. Philip Taylor says

    JD in Boerne This is a great question and one I intend to answer in detail when I file my taxes this year. Rental property gives you the added benefit of being able to subtract depreciation from the income. So my $4k profit will be more like a $2k loss for tax purposes once I subtract $6k in annual depreciation expense. The loss will help reduce my overall tax burden. It’s a huge win.

    • Congrats in a profitable rental property. For the purpose of income taxes, can you categorize mortgage payments as an expense?

      • Philip Taylor says

        Thanks, James. You can categorize the interest, insurance, and property tax portions of the mortgage payment as expense. But not the principal. Schedule E is where it all goes.

  13. JD in Boerne Your taxes are never more than what you earn. Assuming you have a 25% tax rate, if your net income on the rental property is $5,000 for the year, you would pay $1,250 in taxes and keep $3,750 in after-tax profit.

  14. JD in Boerne says

    How does the rent you receive impact your taxable income? I understand that your expenses can be deducted, such as repairs and taxes on the property, but doesn’t the rent collected increase your income and essentially cost you money as you pay taxes on that income?

  15. Philip Taylor says

    DenverEric I hope so too, Eric. My first year wasn’t as good because I took a while to onboard the tenant. But I’m glad I took my time with that because it made year 2 (and beyond hopefully) really solid.

  16. I am about to rent out my Denver condo for the first time. I hope I end up with the same positive cash flow at the end of 2014 that you did for 2013!

  17. moneystepper says

    Pretty good looking figures there – 10.2% return is certainly impressive

  18. Does your mortgage include principal payments? or is it an interest only?
    If it is a fully amortized loan then you are probably asset positive

    • Philip Taylor says

      @MJTM It’s a standard 30 year fixed loan. So you take the principal payments out of your cash flow analysis?

      • @Philip Taylor  @MJTM Probably best to leave principal in as it’s more conservative and can’t easily be extracted.

  19. Pennysaver Pam says

    I think investing in rental property is a wise decision.  And it looks like it won’t take long until it is profitable for you. My husband and I would love to rent out property in the future as well as we think it’s a good way to diversify our investments, instead of having everything in mutual funds, etc.  Glad things are working out for you so far.

  20. @ptmoney Is that your first one? How have you enjoyed it so far? Does it make you more/less interested in doing more?

  21. This is great Phil:-)  I will pass it onto my son who has a basement suite rented out…..
    I’m sure he will find it interesting

  22. HullFinancial says

    Personally, I aim to have a little more cash flow in my properties, as the insurance will drag you down a little further and you’ll probably continue to have some maintenance costs. Still, if you can be pretty close to CF breakeven pre-tax, then you’ll wind up in the good when it’s all said and done, since you’re not having to bump into the standard deduction for mortgage interest given that it’s a rental. It’s a heck of a lot better than selling for a loss. If you can hold onto it (and keep it rented out) long enough, then you’ll either a) pay off the mortgage and have nice positive CF, or get back to at least breakeven on the capital gain of the sale.
    A potential topic to cover, if you haven’t already, would be the depreciation recapture rules on the sale of a rental property. A lot of people aren’t aware of it and certainly don’t understand it.

    • Philip Taylor says

      @HullFinancial What have you found is your vacancy rate across your properties? Obviously I was affected by the 1.5 months (effectively 3 months if you extrapolate) vacancy. I’m hoping to improve upon that in 2013 and see a nice positive cash flow.
      Now don’t go giving me work to do. I studied those rules once, but you know I’ve since forgotten them. Seriously, thanks for the push.

      • HullFinancial says

        @Philip Taylor On the Virginia property, our vacancy is 14%. We refused to let pets and opened it up in the late fall, when few people were looking to rent – or, at least, few people without pets. In our Texas properties, the rate is a touch below 8%. We have a great property manager who keeps them filled, and a great working relationship with her where she birddogs properties for us and has renters lined up as soon as we can close on the property and get it into move-in condition.