Cash Flow Calculator

Because this one charges you for maintenance and capital expenditure every month, whether or not anything broke that month. A roof lasts twenty years and then costs twelve thousand dollars in one week; a calculator that only counts the months when nothing happened will tell you a property cash flows when it does not. The same goes for vacancy — a unit that turns once every three years is losing roughly three percent of its rent to that turnover alone, spread across every month you hold it.

It is the share of your scheduled rent you have to actually collect before the property stops losing money. Cash flow tells you where you are today; break-even occupancy tells you how far you can fall before it hurts. A property at 78% break-even can lose a tenant for two and a half months of the year and still not cost you anything out of pocket. One at 94% cannot survive a single slow turnover. Two properties with identical cash flow can sit either side of that line.

A percentage of rent is a proxy for building size and condition, and it is a weak one — rent tracks the neighbourhood, while a furnace costs the same in a good one and a bad one. Percentages are convenient for screening and reasonable on a portfolio, but on a specific house you are better off pricing the actual deferred items: the age of the roof, the HVAC, the water heater, the service panel. If the building is older than about forty years, treat the percentages here as a floor, not an estimate.

Charge it anyway. Self-managing is a job you are doing for free, and leaving it out of the pro forma means the property only cash flows as long as you keep doing that job — which stops being true the moment you move, get busy, or buy the next three. It also distorts every comparison: a self-managed property and a professionally managed one are not the same investment, and the eight to ten percent is the price of turning one into the other. Set it to zero only if you genuinely never intend to hand it over.

Because most other income does not vanish when a unit sits empty in the same proportion. Parking spaces, storage units, laundry in a shared basement and pet fees have their own occupancy pattern and are usually much smaller and steadier than rent. Applying the same vacancy factor to both slightly overstates the loss. If your other income is really rent by another name — a second lease on the same tenant, say — add it to the rent line instead so it takes the vacancy hit.

Depends what is absorbing it. A hundred dollars a door in a market where rents are rising and your loan is amortising is a different position from a hundred dollars a door with a break-even occupancy of 95% and a twenty-five-year-old roof. Look at break-even occupancy and the operating expense ratio before you look at the cash flow figure itself: they tell you how much of the result is margin and how much is luck. Thin cash flow is survivable; thin cash flow with no slack is how people lose properties.