A property can show a beautiful return on a typical calculator and still bleed cash every month. The difference is four costs that most tools quietly leave out.
Punch a deal into the average online rental calculator and the math looks easy: rent minus mortgage equals profit. By that logic almost every property “cash flows.” Then real life arrives — a tenant moves out, the water heater dies, the roof needs replacing — and the “winner” turns out to lose money.
The calculators aren’t broken. They’re just optimistic, because optimistic numbers feel good and keep you clicking. Here’s what they skip, why it matters, and how to model a deal the way an operator who actually tracks costs would.
No property is rented 100% of the time. Tenants leave, units sit empty for a few weeks, turnovers take longer than planned. A realistic vacancy allowance is 5–8% of gross rent in a healthy market, more in a soft one. Skip it and you’ve overstated income before you even start.
The day-to-day: a leaking faucet, a broken appliance, a clogged drain, paint between tenants. Budget 5–10% of rent. Older properties land at the high end.
This is the big one, and it’s almost always missing. Capex is the expensive, occasional stuff: roof, HVAC, water heater, flooring, windows. It doesn’t hit every month — which is exactly why people forget it — but a $9,000 roof every 20 years is still $37/month you should be setting aside. Reserve 5–10% of rent for it. A deal that ignores capex is borrowing from a future bill it pretends won’t come.
Even if you self-manage today, price in 8–10% of rent. Why? Because your time isn’t free, and the day you want to scale or step back, you’ll pay someone. A deal that only works because you work it for free isn’t an investment — it’s a job.
Two terms cause most of the confusion, so let’s separate them cleanly.
The trap: calculators show you NOI-flavored math and call it “cash flow.” But capex and the mortgage are very real — they just don’t belong in NOI. An honest tool reports both, so you see the comparison number and the wallet number.
| Metric | What it answers |
|---|---|
| Cap rate (NOI ÷ price) | How the property performs on its own, ignoring your loan. Good for comparing deals. |
| Cash-on-cash return (annual cash flow ÷ cash invested) | What your actual money earns after the mortgage. The number that pays you. |
| Break-even occupancy | How full the property must stay just to cover every cost. Above ~90% is thin — little margin for a bad month. |
The 1% rule (monthly rent ≥ 1% of price) is a fast filter, not a verdict. In today’s higher-price, higher-rate markets, very few properties hit it — and some that do still don’t cash flow once you add the four hidden costs. Use rules of thumb to screen, then run the full numbers before you believe anything.
Take a $300,000 rental, 25% down at 6.5%, renting for $2,500/month. The naive calculation:
| Naive math | Amount |
|---|---|
| Rent | $2,500 |
| Mortgage (P&I) | −$1,422 |
| Taxes + insurance | −$392 |
| “Cash flow” | ≈ $686/mo |
Looks great. Now add the four honest costs — vacancy (5%), management (8%), maintenance (5%), capex (5%):
| Honest math | Amount |
|---|---|
| “Cash flow” from above | $686 |
| Vacancy (5%) | −$125 |
| Management (8%) | −$200 |
| Maintenance (5%) | −$125 |
| Capex reserve (5%) | −$125 |
| Real cash flow | ≈ $111/mo |
Same property. The “$686 winner” is really a $111/month, 1.6% cash-on-cash, 90% break-even deal — thin, not great. Nothing changed except honesty. That gap is exactly where investors lose money: they buy the optimistic number.
Run your own honest numbers → Our calculator includes vacancy, capex, maintenance and management by default — and lets you edit every assumption.A rental deal isn’t “good” because a calculator says so. It’s good when it still works after you’ve subtracted the costs that don’t show up every month but always show up eventually. Model vacancy, maintenance, capex and management every single time — and treat any tool that hides them as a sales pitch, not an analysis.