How much cash flow should a rental property generate?

A healthy rental property should generate $200-500+ per month in positive cash flow after all expenses including mortgage, taxes, insurance, maintenance, vacancy reserves, and property management. Cash flow under $200/month leaves little margin for unexpected expenses. Negative cash flow properties are generally not recommended unless you're banking heavily on appreciation.

What expenses should I budget for a rental property?

Budget for: mortgage payment (P&I), property taxes (1.5-2% in Iowa), insurance ($100-150/month), maintenance reserves (1% of property value annually), vacancy (5-10% of rent), property management (8-10% if not self-managing), HOA fees if applicable, and capital expenditure reserves for roof, HVAC, and major systems.

What is the 1% rule in real estate investing?

The 1% rule is a quick screening tool: monthly rent should be at least 1% of the purchase price. A $200,000 property should rent for $2,000/month to meet the rule. While harder to find in appreciating markets like Des Moines suburbs, properties meeting 0.8-1% often still cash flow well. Use detailed analysis to confirm actual returns.

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Real Estate Investment ROI Calculator | Rental Property Returns | Smart Move DSM

📊 Investment Tool

Real Estate Investment ROI Calculator

Calculate cash flow, cap rate, and returns for Des Moines rental properties. Analyze investment potential before you buy.

8-12% Cap Rate

$1,200 Avg Rent

5-7% Vacancy

Investment Details

Purchase Information

Purchase Price

Down Payment

Closing Costs

Rehab Costs

Interest Rate

Loan Term (years)

Monthly Income

Rental Income

Other Income

Monthly Expenses

Property Tax

Insurance

HOA Fees

Maintenance

Vacancy Rate

Property Mgmt

Utilities (if owner-paid)

Investment Analysis

Monthly Cash Flow

After all expenses

Cash-on-Cash Return

Annual return on cash

Cap Rate

NOI vs. property value

Total ROI (Year 1)

Including appreciation

Investment Score

Annual Summary

Gross Rental Income: $0

Operating Expenses: $0

Net Operating Income: $0

Debt Service (P&I): $0

Annual Cash Flow: $0

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Understanding Investment Metrics

Cash Flow

Rent - (Mortgage + Expenses) = Cash Flow

Money left each month after all expenses. Positive cash flow means the property pays for itself and generates profit.

✓ Good: $200-500+/mo | ⚠️ Caution: $0-200 | ✗ Avoid: Negative

Cash-on-Cash Return

(Annual Cash Flow ÷ Cash Invested) × 100

Annual return on the actual cash you invested (down payment + closing + repairs). Your personal ROI accounting for leverage.

✓ Excellent: 10%+ | ✓ Good: 7-10% | ⚠️ Okay: 5-7%

Cap Rate

(NOI ÷ Property Value) × 100

Property's return independent of financing. The return if you paid all cash. Useful for comparing properties.

✓ Strong: 10%+ | ✓ Good: 8-10% | ⚠️ Okay: 6-8%

Total ROI

Cash Flow + Appreciation + Loan Paydown

Complete return including monthly cash flow, appreciation (3-5% in DSM), and mortgage principal paydown.

✓ Excellent: 15%+ | ✓ Good: 12-15% | ⚠️ Okay: 8-12%

Des Moines Rental Market

Median Rents

1-Bedroom

$900

2-Bedroom

$1,100

3-Bedroom

$1,400

Market Benchmarks

Vacancy Rate

5-7%

Property Tax

1.5-2%

Appreciation

3-5%/yr

Best Investment Areas

Appreciation

Waukee

Cash Flow

Altoona

Value Play

Pleasant Hill

Investment Property Tips

What Makes a Good Rental

Strong school district (longer tenants)
Low crime area (lower vacancy)
Near job centers (steady demand)
3-bed/2-bath sweet spot
Under $300K (best cash flow)

Red Flags to Avoid

Negative cash flow
Major deferred maintenance
High HOA fees
Cap rate below 6%
Declining neighborhood

Hidden Costs to Budget

Vacancy (5-10% even with good tenants)
Maintenance (1% of value/year)
Capital expenses (roof, HVAC)
Property management (8-10%)
Eviction costs ($2K-5K)

Tax Benefits

Depreciation (27.5 years)
Deduct mortgage interest
Deduct operating expenses
1031 exchange to defer gains
Travel for property inspections

Investment FAQs

What is a good cap rate for rental property?

In Des Moines, 8-12% is good. Above 10% is excellent, 6-8% is average, below 6% may indicate overpriced property. Higher cap rates often mean higher risk areas.

What is cash-on-cash return?

It measures annual return on the cash you invested (down payment + closing + repairs). Formula: Annual Cash Flow ÷ Total Cash Invested × 100. Target 10%+ for excellent returns.

How much cash flow should a rental generate?

Target $200-500+/month after all expenses. Under $200/month leaves little margin for surprises. Negative cash flow is generally not recommended unless banking on appreciation.

What is the 1% rule?

Monthly rent should be at least 1% of purchase price. A $200K property should rent for $2,000/month. Properties at 0.8-1% often still cash flow well in appreciating markets.

What expenses should I budget for?

Budget for: mortgage, property taxes (1.5-2%), insurance ($100-150/mo), maintenance (1% of value/year), vacancy (5-10%), property management (8-10%), HOA if applicable, and capital reserves.