Estimate gross monthly rent
Multiply monthly rent by 12 to get annual rental income
Add other income sources such as parking, laundry, pet fees, or storage
Estimate vacancy loss as a percentage of gross rental income
Subtract vacancy loss from gross rental income to get effective gross income
Estimate operating expenses, including property taxes, insurance, repairs, maintenance, utilities, HOA fees, property management, and advertising
Include reserves for capital expenditures and replacement costs
Subtract total operating expenses from effective gross income to get net operating income
Estimate annual debt service, including mortgage principal and interest
Subtract annual debt service from net operating income to get cash flow before taxes
Subtract any additional costs such as closing costs, refinancing costs, or one-time startup expenses if needed
Divide annual cash flow by total cash invested to calculate cash-on-cash return
Use conservative estimates for rent, vacancy, and expenses
Compare projected cash flow to your target return and risk tolerance