Rental Income Calculator Formula

Understand the math behind the rental income calculator. Each variable explained with a worked example.

Use the Rental Income Calculator

Formulas Used

Effective Annual Income

effective_annual_income = (gross_annual_rent + other_annual) * (1 - vacancy_rate / 100)

Gross Potential Income

gross_potential_income = gross_annual_rent + other_annual

Annual Vacancy Loss

vacancy_loss = (gross_annual_rent + other_annual) * vacancy_rate / 100

Variables

VariableDescriptionDefault
num_unitsNumber of Units4
avg_monthly_rentAverage Monthly Rent Per Unit(USD)1200
vacancy_rateExpected Vacancy Rate(%)8
other_monthly_incomeOther Monthly Income(USD)200
gross_monthly_rentDerived value= num_units * avg_monthly_rentcalculated
gross_annual_rentDerived value= gross_monthly_rent * 12calculated
other_annualDerived value= other_monthly_income * 12calculated

How It Works

Projecting Rental Income

Rental income projection starts with gross potential income and adjusts for expected vacancy and collection losses.

Formula

Gross Potential Income = (Units x Avg Rent x 12) + Other Income

Effective Income = Gross Potential x (1 - Vacancy Rate)

Other Income Sources

  • Laundry facilities, parking fees, pet rent
  • Storage rentals, vending machines
  • Late fees and application fees

    • Worked Example

    A 4-unit property averages $1,200/month rent per unit with $200/month other income and 8% vacancy.

    num_units = 4avg_monthly_rent = 1200vacancy_rate = 8other_monthly_income = 200
    1. 01Gross monthly rent: 4 x $1,200 = $4,800
    2. 02Gross annual rent: $4,800 x 12 = $57,600
    3. 03Other annual income: $200 x 12 = $2,400
    4. 04Gross potential income: $57,600 + $2,400 = $60,000
    5. 05Vacancy loss: $60,000 x 8% = $4,800
    6. 06Effective annual income: $60,000 - $4,800 = $55,200

    Ready to run the numbers?

    Open Rental Income Calculator