Rental Property Pro Forma
Multi-year cash flow projection for a rental property with rent growth, opex inflation, vacancy, and debt service. Year-by-year NOI and cash flow table.
Property tax, insurance, maintenance, management, utilities, capex reserve combined.
Historically CPI around 2-3%; insurance and property tax often run hotter.
Capped at 40. Long horizons compound assumption errors; 5-10 years is typical.
| Yr | Gross | EGI | Opex | NOI | Cash flow |
|---|---|---|---|---|---|
Debt service held constant (appropriate for fixed-rate mortgages). For ARMs, manually increase debt service at expected reset years.
About this tool
A pro forma is a multi-year cash flow projection. Brokers use them to sell deals, investors use them to underwrite, and the two rarely line up. Broker pro formas assume generous rent growth, low vacancy, and opex that never inflates. Investor pro formas should assume modest rent growth, realistic vacancy, and opex that inflates roughly with CPI. The difference between those two assumption sets is often the difference between "this deal works" and "this deal fails in year 3."
This calculator builds a straightforward projection you can parameterize. Enter year-one gross rent, annual rent growth, vacancy rate, year-one operating expenses, annual opex inflation, annual debt service, and how many years to project. The output is a year-by-year table showing gross rent, effective gross income, operating expenses, net operating income, and cash flow after debt service, plus cumulative NOI and cash flow across the projection.
Assumption anchors to consider: rent growth in stable US markets historically runs 2-3%, growth markets 4-6%, declining markets 0% or negative. Opex inflation historically tracks CPI around 2-3% though insurance and property tax have been running hotter in recent years. Vacancy typically 5% for stabilized suburban, 8-10% for urban high-turnover. These are market-dependent; use local data when available. See the cap rate calculator for the year-one snapshot that feeds this projection.
How it works
For each year of the projection: gross_rent_Y = gross_rent_Y1 × (1 + rent_growth)^(Y-1). EGI = gross_rent × (1 - vacancy_pct/100). opex_Y = opex_Y1 × (1 + opex_inflation)^(Y-1). NOI = EGI - opex. cash_flow = NOI - debt_service.
Debt service is held constant across the projection. This is correct for a fixed-rate mortgage; for ARMs, reset the debt service input at years when rate resets are expected. The calculator does not model refinance events, capital expenditures (new roof, HVAC, appliances), or major turn costs. Experienced underwriters add a 1-2% annual capex reserve to opex to account for the things that inevitably break. This tool's opex input can include that reserve if you wish.
The EGI formula uses a flat vacancy rate for simplicity. More sophisticated pro formas increase vacancy in year one (lease-up) and decrease in later years (stabilized). The delta is usually small enough that the flat-rate simplification is acceptable for a first-pass underwrite.
Examples
A standard single-family rental projection with modest assumptions. Year 5 NOI compounds to around $27k from the year 1 baseline of $24.2k. Cumulative cash flow of about $50k over 5 years tracks with typical suburban SFR investor expectations at these rent and opex growth rates.
A duplex projection with moderately optimistic rent growth. By year 10, compound rent growth pushes NOI up meaningfully and cumulative cash flow runs over $150k. Layered with principal paydown and appreciation at typical leverage, investor IRR on a deal like this lands in the mid-teens.
A declining-market scenario: rent barely grows while opex inflates faster than rent. Cash flow drops each year; by year 5 the deal may be near zero. This is how soft markets kill rental investments slowly rather than all at once.
When to use
Use this as the standard underwriting pro forma when evaluating a rental purchase, when renegotiating a loan that will change debt service, or when modeling the impact of a rent bump or opex change on an existing rental. Broker-provided pro formas are usually too aggressive; rebuild the assumptions yourself here. Pair with rental depreciation to layer in the tax side and with cash-on-cash for the year-one return on invested capital.
Related concepts
Frequently asked questions
Should I include capex reserves in opex?
Yes, generally. Capital expenditures (roof, HVAC, flooring, kitchens) are real costs that hit over a multi-year hold. Underwriters typically add 5-10% of gross rent as a capex reserve line, which may be added to the opex input here. Skipping it makes a five-year pro forma look artificially rosy.
Why hold debt service constant?
For a fixed-rate mortgage, the payment stays the same over the amortization. Only the interest/principal split shifts. If you have an adjustable-rate loan, manually increase the debt service input at years when you expect rate resets, based on the loan's cap structure.
Does this model property appreciation?
No. This is a cash-flow pro forma, not a total-return model. Appreciation is not part of NOI or cash flow. For a total-return view, add estimated terminal value at year N (based on NOI × 1/cap rate) and compute IRR on the combined cash flow stream.
Sources
- IRS Publication 527 (Residential Rental Property)
(primary, accessed Apr 16, 2026)
Rental income and expense categorization that defines the NOI components projected year-over-year.
Related tools
Cap Rate and NOI Calculator
Calculate net operating income and cap rate for a rental property from gross rent, vacancy, and operating expenses. Standard CRE valuation formula.
Cash-on-Cash Return Calculator
Calculate cash-on-cash return from annual cash flow and total cash invested. The standard leveraged-return metric for rental real estate deals.
Rental Property Depreciation Schedule
Year-by-year MACRS 27.5-year straight-line depreciation schedule for a residential rental property, with land value excluded from the depreciable basis.