How to Calculate Cash Flow on a Columbus Rental Property
Cash flow is rent collected, minus a vacancy allowance, minus operating expenses, minus principal and interest. The arithmetic is easy. Picking the right numbers to put in it is where Columbus owners lose money, usually in three specific places.
In this article
- What is cash flow, and how is it different from NOI?
- How do you build the income side?
- Which expenses belong in the calculation?
- The three places owners get the numbers wrong
- A worked example on a Columbus single-family rental
- How do you build a pro forma for future years?
- Frequently asked questions
What is cash flow, and how is it different from NOI?
Cash flow is what reaches your bank account. NOI is what the property earns before the loan. The difference between them is principal and interest, and keeping them separate is the difference between analyzing a property and analyzing your mortgage.
The order of operations:
- Gross scheduled rent, plus other income
- Minus a vacancy and credit-loss allowance
- Equals effective gross income
- Minus operating expenses
- Equals net operating income (NOI)
- Minus principal and interest
- Equals cash flow
Two properties with identical NOI can have wildly different cash flow, because one carries a 30-year loan at a high rate and the other is paid off. Two properties with identical cash flow can be worth very different amounts, because value tracks NOI rather than cash flow. Use NOI when you are asking how good the property is. Use cash flow when you are asking whether you can hold it. The valuation side is covered in how to increase NOI on a Columbus rental property.
Cash flow = NOI minus principal and interest. If your calculation has the mortgage inside NOI, the number you are calling NOI is something else.
How do you build the income side?
Start with market rent from recent signed leases, not from active listings.
This is the first place the math goes wrong. Owners search Zillow, find four comparable houses asking $1,750, and put $1,750 in the spreadsheet. Those four houses are asking $1,750 and have not rented. They are the units still on the market, which makes them a ceiling rather than a market. A comparable unit that signed last month at $1,650 is worth more to your projection than ten active listings.
For context on the range, the RL Property Management portfolio average rent is $1,653 across Columbus-area single-family homes and small multifamily. Your submarket, condition and bedroom count will move that a lot, so treat it as a sanity check rather than an input.
Other income is smaller and real: pet rent, application fees you keep, parking on a multifamily, laundry, and utility reimbursement where the lease assigns it.
Then take a vacancy allowance off the top. Discount gross rent by 4 to 8 percent depending on the property, the submarket and how long your typical resident stays. On a $1,650 rent, 6 percent is about $99 a month. Owners who skip this line are projecting a property that is never empty, which no property is. For reference, current portfolio occupancy runs 91 percent and the median unit takes 20 days from listing to signed lease.
Which expenses belong in the calculation?
Everything recurring that keeps the unit rentable, in these categories.
Repairs and maintenance. Usually the largest controllable line. We prefer estimating this per square foot rather than as a percentage of rent, because a 1,900 square foot house does not cost less to maintain just because it rents cheaply. Budget roughly $1 to $2 per square foot per year. On a 1,400 square foot house that is $1,400 to $2,800 annually.
Turnover. Every move-out costs cleaning, paint, repairs, re-keying, and marketing, on top of the vacant days. Estimate how often a resident actually leaves and put a share of a full turn in every year rather than pretending turnover years do not exist. The real cost of a Columbus turnover covers what goes into it.
Property taxes. See the next section. This is the line most often wrong.
Insurance. A rental dwelling policy, not a homeowner’s policy. Shop it, and confirm the liability limits your lender and your manager require.
Property management. Flat management runs $117 to $184 per unit per month by plan, plus a $125 annual accounting and technology fee, with a $0 leasing fee. Percentage-based managers price differently, typically a share of collected rent plus a separate placement fee, so compare a full year including a turnover rather than comparing headline rates.
Recurring maintenance. Lawn care, gutter cleaning, and snow removal. On a multifamily with a parking lot, snow removal is billed per event, which makes it a weather bet, not a fixed cost.
Utilities you actually pay. Whatever the lease does not assign to the resident, plus water and sewer during vacancies, plus common-area electric on a small multifamily.
Pest control, HOA or condo dues, and accounting. Small individually, and easy to forget entirely.
Capital reserves. Not technically an operating expense, and still money that has to leave the account every month. Roofs, furnaces, water heaters, driveways and windows all have finite lives and none of them fail conveniently. Fund the reserve monthly or plan on funding it from savings in a hurry. The timing of capital expenditures covers how to schedule the big ones.
Debt service. Principal and interest, subtracted last. Escrowed taxes and insurance are already counted above, so do not count them twice by using the full escrowed payment.
The three places owners get the numbers wrong
1. The property tax line, after a purchase
This one costs the most. If you are buying, do not use the tax figure on the county auditor’s site, because that figure reflects the previous owner’s assessed value. A sale re-triggers valuation, the assessment moves toward your purchase price, and the tax bill can rise sharply, in some cases enough to erase the cash flow the deal was underwritten on.
Estimate taxes from your purchase price and the effective millage for the taxing district, not from the current bill. Columbus-area rates vary meaningfully across school districts within a few miles, so the district matters as much as the price.
2. The rent comp
Covered above and worth repeating, because it is the input every other number keys off. Signed leases, not asking prices. If a spreadsheet is $150 a month optimistic on rent, it is $1,800 a year optimistic on cash flow, which on most single-family rentals is the entire margin.
3. The reserve nobody funds
A pro forma with no capital reserve line shows positive cash flow for four years and then a $9,000 furnace and roof year that wipes out all of it. The property did not fail. The projection did. Reserve requirements on managed units run $350 to $1,500 per unit depending on plan, and the underlying logic applies whether or not anyone else is holding the money.
A worked example on a Columbus single-family rental
Illustrative only, with round numbers. Substitute your own on every line.
| Line | Monthly |
|---|---|
| Market rent | $1,650 |
| Vacancy allowance at 6% | ($99) |
| Effective gross income | $1,551 |
| Property taxes | ($290) |
| Insurance | ($95) |
| Repairs and maintenance ($1.50/sq ft on 1,400 sq ft) | ($175) |
| Turnover reserve | ($100) |
| Capital reserve | ($150) |
| Property management (Plan One, $117 plus $125 a year) | ($127) |
| Lawn, gutters, pest, accounting | ($60) |
| Net operating income | $554 |
| Principal and interest | ($1,000) |
| Cash flow | ($446) |
Only the management line is a real published figure. Rent, taxes, insurance, the reserves and the loan payment are placeholders, and yours will differ on every one of them. The point of the table is its shape: a property with a genuinely healthy $554 of monthly NOI is $446 a month negative once a large loan sits on top. Same property, two very different answers, depending on which question you asked.
How do you build a pro forma for future years?
A pro forma is the same calculation extended forward, with explicit assumptions you can argue with.
If you want a starting structure rather than a blank sheet, RLPM publishes a property pro forma template laid out in the order above, with the expenses split into the ones your manager pays before disbursement and the ones you pay after it.
Build a column per year and state four assumptions plainly: annual rent growth, annual expense growth, turnover frequency, and your vacancy allowance. Then change one at a time and watch what happens. That sensitivity test is the actual value of the exercise, more than the number in the bottom right corner.
Two honest cautions. Every figure past year one is a guess, and small assumption changes compound hard over ten years. And a pro forma that only works if rents grow every year is not a plan, it is a hope. Run one column where rents are flat for three years and see whether you can still hold the property. If you can, the deal has a floor.
Frequently asked questions
What is a good cash flow for a rental property?
Positive, after a vacancy allowance and a funded capital reserve. Percentage rules of thumb travel badly between markets and price points, so the more useful test is whether the property still cash flows in a year with one turnover, one vacant month and one major repair. If it does, the number is good enough.
Is cash flow the same as profit?
No. Cash flow ignores depreciation, which affects your taxes but not your bank account, and it counts principal payments as money out even though they build equity. It is the best measure of whether you can hold a property, and a poor measure of total return.
How much should I budget for repairs and maintenance?
Roughly $1 to $2 per square foot per year, estimated on square footage rather than as a percentage of rent. Older Columbus housing stock, original mechanicals, and deferred maintenance from the previous owner all push toward the high end of that range.
Should property management fees be in the cash flow calculation?
Yes. Management is an operating expense and it belongs in the projection whether you hire a manager or not. If you self-manage, the fee line is $0 and the time cost is real, which is what the self-management calculator is for.
What vacancy rate should I assume?
Discount gross rent by 4 to 8 percent. Use the low end for a stable submarket and a long-term resident, the high end for higher turnover or a property that is harder to lease. Current portfolio occupancy is 91 percent, with a median 20 days from listing to signed lease.
Why did my cash flow drop after I bought the property?
Almost always the property tax reset. A sale moves the assessed value toward the purchase price, and the new bill can be far higher than the one on the auditor’s site when you underwrote the deal. Estimate taxes from your purchase price before closing, not after.
Want a real number for your property?
A rent evaluation gives you the income line from recent signed leases in your submarket. A consultation covers the expense side against your actual unit.
Or schedule a consultation · 614.725.3059
Keep reading
- How to increase NOI on a Columbus rental property, the valuation half of the same math
- What does a rental property turnover actually cost in Columbus?
- The timing of capital expenditures
- Rent or sell: what is the best move?
- Self-management calculator, the time and cost side of doing it yourself
