Mortgage Calculator for Rental Property—How to Calculate Positive Cash Flow

The best time to calculate whether you will have a positive cash flow on a rental property is before you buy it. You need to use a mortgage calculator for rental property so that you will have a more or less objective calculation and more reliable results. If you already have the property, then the best thing that you can do is to lower your expenses relative to your income so that you will still have a positive cash flow.

Online Mortgage Calculator for Rental Property

An online mortgage calculator for rental property will greatly help you determine whether you will have a positive cash flow or not. You have to remember though, these are estimates and do not necessarily reflect all that you need to know so take the results with a grain of salt.

1. Determine the principal

This is the figure that you will get minus whatever down payment you may have given. For example, if you purchased the property for $230,000, you put up a $30,000 down payment, your principal would be $200,000.

2. Select the length of amortization

In most cases, a mortgage for a house is amortized for 30 years. If you look hard enough, you can also find 40-year loans and there are those that are shorter than 30 years.

3. Enter your interest rates

You can find the interest rates from various mortgage company websites. Anyhow, you have to be careful. Due to the different of mortgage plans, not all interest rates may be posted in a website.

4. Determine the monthly rent

Determine the monthly rents that your property is likely to generate. Since this is an estimate, you have to consider the location of the property and determine the current going rate of the place. Try to determine also the rates of similar buildings of the area and what amenities they provide for the rates. This way, you will have a good estimate of how much you are likely to earn from the rents.

5. Calculate your annual operating expenses

Wear and tear is a very likely hole in your pocket so you should take this to consideration as well. On top of that, you also have to consider insurance and taxes as part of your annual operating expenses.

6. Calculate the net yield

After you have taken all the possible expenses, calculate it against your projected rental and what you get is your likely net yield. Since all these are rough estimates, don’t forget to be conservative in your figures.

You can use the online mortgage calculator rental property to determine the attractiveness of a given property. If the potential rental yield is high, then you can be sure to have a positive cash flow.

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