How to use the rental cash flow sensitivity grid
- Enter the rent for the middle row and the step between rows.
- Enter up to three vacancy rates.
- Enter the monthly operating expenses, the monthly mortgage payment and the cash you invested.
- Read the grid of monthly cash flow and the grid of cash-on-cash return.
Formula
Cash flow a month = rent x (1 - vacancy) - operating expenses - mortgage payment
Cash-on-cash return = 12 x cash flow a month / cash invested
Rows are the middle rent plus or minus one and two steps
Amounts and returns below zero are shown in parentheses.
A $2,000 rent with $600 of expenses and a $1,000 mortgage payment
With no vacancy the cash flow is $2,000 - $600 - $1,000 = $400 a month, or $4,800 a year, which is 8.0% on $60,000 invested. At 5% vacancy it falls to $300, and at 10% to $200.
Rents from $1,800 to $2,200 in $100 steps give a range from $20 a month (at $1,800 and 10% vacancy) to $600 a month (at $2,200 with no vacancy). If the mortgage payment rises to $1,350, the base case falls to $50 a month.
Why a grid beats a single number
A rental calculation with one rent and one vacancy rate looks precise, but rent and vacancy are both uncertain. Seeing a grid shows how much cash flow moves when either one changes, and how close the property is to losing money. The cells below zero are the combinations you cannot afford without extra savings.
The step between rows is yours to set. A small step shows fine detail, and a larger one shows what a real shift in the market might do.
What the grid holds fixed
Expenses stay the same in every cell, although management fees, repairs and some taxes change with rent and with how long the property stands empty. Add a buffer if that matters to you. For the full property analysis see the Rental Property Calculator, for the return on the cash invested the Cash-on-Cash Return Calculator, for the return before financing the Cap Rate Calculator, and for the payment itself the Mortgage Calculator.
Assumptions and limits
- Rent, vacancy, expenses and the mortgage payment are monthly figures, with vacancy as a share of rent.
- Operating expenses are the same in every cell.
- The figures shown are examples. Use your own property numbers.
- The grid does not include taxes on income or the gain from paying down the loan.
Frequently asked questions
What goes in operating expenses?
Property tax, insurance, repairs, management and any other costs of owning the rental, but not the mortgage payment, which has its own box.
Can I use one vacancy rate?
Yes. Enter one, two or three rates separated by spaces and the grid has that many columns.
What is cash invested?
The money you put in yourself: the down payment, closing costs and any repairs you paid for up front.
Why is the middle row the rent I entered?
It keeps your own rent at the center, with two cheaper and two dearer rents around it for comparison.