What vacancy rate should I use?

In tight rental markets (Sydney, Melbourne inner suburbs, Brisbane 2023-2024), vacancy rates have been 1-2%. In normal markets, 3-4% is appropriate for a 3-4 week vacancy between tenants each 12-18 months. In regional areas or markets with high supply, 5-10% is more appropriate. Always use your local Real Estate Institute vacancy data, not a generic number.

Is it the mortgage repayment or just the interest that I include in cash flow?

For cash flow analysis, include the full mortgage repayment (principal and interest) because both the principal and interest are real cash outflows each month. For tax purposes, only the interest component is deductible as an expense. The principal repayment reduces your loan balance (builds equity) but is not a deductible expense.

What is the difference between cash flow and profit for tax purposes?

Cash flow is the actual money flowing in and out of your bank account each month. Taxable profit (or loss) for an investment property is rental income minus all deductible expenses including depreciation (a non-cash deduction) but excluding principal repayments. A property can be cash-flow negative but show a larger accounting loss (due to depreciation) or a smaller accounting loss than cash flow (if interest is the only major deductible cost).

Landlord Cash Flow Calculator — Free Real Estate Calculator

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Landlord gets the monthly statement from the property manager and cannot figure out why there is never any money left. Before the next meeting with the accountant, they need the full monthly cash flow broken down.

Landlord Cash Flow Calculator

Cash Flow

Weekly rent ($)

Vacancy rate (%)

AU average ~2–4%

Monthly mortgage payment ($)

Monthly management fee ($)

Monthly rates + insurance ($)

Monthly maintenance budget ($)

Positive cash flow: Rent exceeds all costs — the property pays for itself and puts money in your pocket each month.
Negative cash flow: Costs exceed rent — you top up the shortfall from your own income. You may claim the shortfall as a tax deduction (negative gearing).
Most Australian investment properties are negatively geared, relying on capital growth for total return.

Reference: ASIC MoneySmart

ℹ️ Results are estimates for planning purposes. Verify with current standards and a qualified professional.

1 What this calculator does

Calculates monthly and annual investment property cash flow from weekly rent, vacancy allowance, mortgage repayment, property management fee, fixed costs and maintenance. Shows whether the property is positively or negatively geared and the true monthly out-of-pocket cost.

2 Formula & professional reasoning

Monthly gross rent = Weekly rent x 52 / 12
Effective rent = Monthly gross rent x (1 - Vacancy rate)
Total monthly costs = Mortgage + Management + Fixed costs/12 + Maintenance/12
Monthly cash flow = Effective rent - Total costs
Annual cash flow = Monthly cash flow x 12

Monthly cash flow is the most practical metric for landlords because it represents the actual bank account impact each month. The vacancy rate (typically 2-4% in tight rental markets, 5-10% in slow markets) converts gross rent into effective rent. Fixed annual costs (rates, insurance, land tax) are divided by 12 to create a monthly provision -- even though they are paid annually or quarterly, they need to be reflected in the monthly analysis.

3 Worked examples

⚠️ Illustrative example only — not clinical or professional instruction.

Basic

Standard investment property monthly cash flow

Working:

Monthly gross rent: $450x52/12 = $1,950 | Effective: $1,950x0.97 = $1,892 | Costs: $3,200+$180+$300+$333 = $4,013 | Cash flow: $1,892 - $4,013

Answer: Monthly cash flow: -$2,121 | Annual: -$25,452 negatively geared

💡 The landlord is out $2,121/month. At 37% marginal rate, the tax saving (from negative gearing) is approximately $2,121x0.37x12/12 = $785/month -- reducing the effective cost to approximately $1,336/month.

Standard

Positively geared regional property

Working:

Monthly gross: $480x52/12 = $2,080 | Effective: $2,080x0.96 = $1,997 | Costs: $1,800+$200+$200+$250 = $2,450 | Cash flow: $1,997 - $2,450

Answer: Monthly cash flow: -$453 | Annual: -$5,436 -- marginally negatively geared

💡 Appears close to break-even. At a lower interest rate environment or once the loan is reduced, this property could become positively geared. Regional properties often have the highest path to positive gearing.

Advanced

Multi-property landlord -- portfolio cash flow

Given: Property 1: -$1,200/mo | Property 2: -$800/mo | Property 3: +$450/mo

Working:

Portfolio monthly: -$1,200 - $800 + $450 = -$1,550/mo | Annual: -$18,600 | At 37% tax rate, saving: $18,600 x 0.37 = $6,882 | Net out-of-pocket: $11,718/yr ($225/week)

Answer: Portfolio net cost: $225/week after tax benefit

💡 A portfolio approach allows positive-gearing properties to offset negative-gearing ones. The net tax position should be calculated across all investment properties, not property by property.

4 Sanity check

Typical property management fee

Residential: 7-12% of gross rent | Plus letting fee: 1-2 weeks rent when a new tenant placed

Vacancy rate benchmarks

Capital city tight market: 1-2% | Normal market: 3-4% | Regional/slow market: 5-10%

Apply the correct vacancy rate for your local market -- using 0% overstates income.

Fixed costs monthly provision

Rates + insurance + land tax divided by 12 | Even though bills arrive quarterly or annually

Landlords who forget to provision for annual bills run into cash flow surprises.

Cash flow before vs after tax

This calculator shows pre-tax cash flow | Apply marginal tax rate to the shortfall for the after-tax position

Use the Negative Gearing Calculator to calculate the tax benefit.

5 Common errors

Error	Cause	Consequence	Fix
Using 52 weeks rent without a vacancy allowance	Assuming the property is always tenanted	Income overstated -- actual cash flow worse than modelled	Always apply a vacancy rate. Even in tight markets a property is typically vacant for 1-3 weeks between tenancies plus potential arrears periods.
Forgetting property management letting fees	Including the ongoing management percentage but not the letting fee	Annual costs understated -- especially in markets with higher tenant turnover	Add one to two weeks rent per year as a provision for letting fees. In high-turnover markets this can significantly impact annual cash flow.
Not separating principal and interest in the mortgage repayment	Treating the full repayment as a cash outflow against rental income	Cash flow looks worse than the tax position reflects -- interest is deductible but principal repayment is not	For tax purposes only the interest component is deductible. For cash flow analysis use the total repayment. For profitability analysis separate interest (deductible expense) from principal (equity building).
Not updating the model when interest rates change	Using the initial modelled repayment in an interest rate rising environment	Cash flow significantly worse than the model shows	Recalculate mortgage repayments whenever the interest rate changes. A 1% rate rise on a $500,000 loan adds approximately $417/month to repayments.

6 Reference & regulatory links

🇦🇺 Australia

🇺🇸 United States

7 Professional workflow

Common tools used alongside this one:

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Rental Yield Calculator

Rental Yield gives the income picture; Cash Flow adds the mortgage and shows the true out-of-pocket position

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Negative Gearing Calculator

Negative Gearing shows the tax benefit that partially offsets the monthly shortfall shown here

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Refinance Break-Even Calculator

Refinancing to a lower rate directly improves monthly cash flow -- use Refinance Break-Even to quantify the benefit

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Input	Result
Vacancy allowance	2-4% tight market \| 5-10% slow market
Management fee typical	7-12% of gross rent
Maintenance provision	1-2% of property value per year