What Is the Real Cash Flow on a $300,000 Rental Property?

By Matthew Whitaker, founder of Evernest. Updated July 2026.

This post includes financial projections, depreciation estimates, and tax benefit calculations. It is general guidance, not financial or tax advice. Tax rules vary by situation and change over time. Talk to a CPA who specializes in rental real estate for guidance specific to your circumstances.

If you've got a $300,000 rental property and want to know what the real monthly cash flow looks like, not the fantasy version but the actual numbers, this is the math. Most first-time landlords overestimate their cash flow by about 50% because they're not budgeting for the right things. I've run this exact math thousands of times at Evernest across 15,000 properties. I'm Matthew Whitaker, founder of Evernest and author of How to Rent Your Home. By the end of this post, you'll know whether your rental is actually making you money or just keeping you company.

The short version. A $300,000 rental at $2,500 a month does not cash flow $1,000 a month. Properly accounted for, it breaks roughly even on cash flow. But cash flow is the smallest of four returns the property is paying you. When you add tax benefits, principal paydown, and appreciation, the total return on a $75,000 down payment is closer to 22% in year one. The owners who build real wealth from rentals understand this from the start.

The Fantasy Math (And Why It's Wrong)

Here's the setup. A $300,000 single-family rental. You put 25% down: $75,000. You finance $225,000 at 7% on a 30-year loan. That gives you a monthly principal and interest payment of about $1,500. You rent it for $2,500.

The obvious math: $2,500 in, $1,500 out. That's $1,000 in monthly cash flow, or $12,000 a year. That's the number almost every first-time landlord puts in their spreadsheet, and it's wrong.

Here's why.

Fixed Costs and Management: The First Reality Check

Before you count a dollar of profit, you have to pay what you owe every month whether the property is occupied or not.

Property taxes on a $300,000 house average about 1.1% nationally. That's $3,300 a year, or $275 a month. Landlord insurance runs roughly $1,500 to $2,000 a year in most markets. Call it $1,800, which is $150 a month.

Add those to the mortgage payment and you're already at about $1,925 a month in fixed costs. Against $2,500 in rent, you're down to $575 a month before you've paid for a single other thing.

Now add property management. If you self-manage, you skip this fee, but you're spending 10 to 15 hours a month running the property. If you hire it out, the standard fee is 8% to 10% of rent collected. On a $2,500 a month rental, that's about $225 a month. Cash flow drops to $350.

Still positive. But already a long way from $1,000.

The Reserve System: Where Most Landlords Quietly Lose Money

This is the part that trips up almost every first-time landlord, because the reserves don't show up as a bill. They just quietly disappear if you don't plan for them, and then an HVAC goes out and you don't have the money.

Here's how the reserves break down on this property:

• Vacancy reserve. Plan for one month of vacancy per year on average. That's $208 a month set aside.
• Maintenance reserve. Budget 5% to 10% of rent for routine upkeep: garbage disposals, faucets, HVAC service calls, caulk. Call it 7%, or $175 a month.
• Capital expenditure reserve. Another 5% for the big items, the roof, HVAC, water heater, and appliances that all need eventual replacement. That's $125 a month.
• Tenant turnover reserve. About $50 a month to cover cleaning, paint touch-ups, and small repairs when a tenant moves out.

Total reserves: $508 a month. Half a thousand dollars a month that doesn't go into your pocket. It goes into a separate account, earmarked for when you need it.

If you actually fund those reserves, which you should, the monthly cash flow on this property is now negative $158 a month. You're running in the red on what looked like a $1,000 a month cash flowing property.

The Honest Cash Flow Number

Before you close the tab, here's the important nuance.

The reserves don't all get spent every year. Your vacancy might be zero this year. You might go three years without a major capital expense. Some months you'll bank $1,000. Other months you'll spend $5,000 on an HVAC replacement. The reserve system is what smooths those swings so you're never caught off guard by a bill you can't pay.

The honest answer to "what does this property cash flow?" on a $300,000 rental at $2,500 a month, properly reserved, is somewhere between negative $200 and positive $200 a month. Not the $1,000 in the original spreadsheet. That gap is what most first-time landlords trip over.

If you bought this property expecting $1,000 a month to fund your lifestyle, you're going to be disappointed. That's not how single-family rentals work in this rate environment.

But here's what almost nobody explains honestly: cash flow is the smallest of the four returns this rental is paying you. The other three are doing the real work.

Return 2: The Tax Benefit

The IRS lets you depreciate the building itself over 27.5 years. On a $300,000 house where roughly $240,000 is the building and the rest is land, that's about $8,700 a year in depreciation deductions.

$8,700 of paper income that doesn't get taxed. For owners in a 24% to 32% tax bracket, that works out to about $2,000 to $3,000 a year in actual tax savings. You didn't spend that money, and the IRS let you reduce your taxable income as if you had. It's sometimes called a phantom deduction, because the loss is on paper only.

The tax benefit alone adds about $200 a month to your effective return.

Talk to a CPA who knows rental real estate before you model this for your specific situation. The math varies based on your income, your other deductions, and how the passive activity rules apply to you. But the depreciation benefit is one of the primary reasons rentals work as long-term wealth builders.

Return 3: Principal Paydown

Your tenant is paying your mortgage. That's not a metaphor. On a $225,000 loan at 7%, your tenant pays down about $2,400 of principal in year one. That's $200 a month of equity accumulating on your loan statement.

You don't feel it in your checking account. But it's real, and it compounds. In year two, the paydown is slightly higher because more of the fixed payment goes to principal. Every year the tenant pays, the equity position improves.

Return 4: Appreciation

If the property appreciates at 4% a year, which is roughly the long-term average for residential real estate, the house gains about $12,000 in value in year one. That's another $1,000 a month in paper wealth.

You won't feel it monthly. You'll feel it when you refinance and pull equity out to fund the next deal, or when you sell and collect the gain. But it's stacking the whole time.

The Total Return Picture

Let's add it all up for year one on this $300,000 property:

• Cash flow (properly reserved). Roughly break even.
• Tax benefits. About $200 a month in real tax savings from depreciation.
• Principal paydown. About $200 a month in equity your tenant is building for you.
• Appreciation. About $1,000 a month in paper wealth at a 4% annual growth rate.

Total monthly return: approximately $1,400. Total annual return: roughly $16,800. Return on your $75,000 down payment: about 22% in year one.

The cash flow that everyone obsesses over is the smallest piece. The other three returns are doing the heavy lifting.

This is why patient real estate investors build wealth while landlords chasing monthly cash flow get frustrated and quit. It's not the rent check. It's the tax benefit, the paydown, and the appreciation quietly stacking underneath the rent check, year after year after year.

Single-family rentals in this rate environment are not a side hustle. They are a long-term wealth builder. The owners who do best understand that difference before they buy their first one. They don't measure success month to month. They measure it decade to decade. And the math compounds in their favor the entire time.

Frequently Asked Questions

What is the real cash flow on a $300,000 rental property?A $300,000 rental at $2,500 a month, properly budgeted with fixed costs, property management, and reserves for vacancy, maintenance, capital expenditures, and turnover, generates somewhere between negative $200 and positive $200 a month in cash flow. Not the $1,000 a month most landlords project. The gap comes from reserves and real operating costs most first-time landlords leave out of their spreadsheets.

What expenses do most landlords forget when calculating rental cash flow?The most commonly missed expenses are the four reserves: vacancy (plan for one month per year, or about $208 a month on a $2,500 rental), routine maintenance (5% to 10% of rent), capital expenditures for major system replacements (another 5%), and tenant turnover costs. Together those reserves run about $508 a month on this example property, turning a $1,000 projected cash flow into roughly break even.

What is depreciation on a rental property and how does it affect my taxes?The IRS allows you to deduct the cost of the building itself over 27.5 years. On a $300,000 house where roughly $240,000 is the structure, that's about $8,700 a year in depreciation deductions. For owners in a 24% to 32% tax bracket, that generates roughly $2,000 to $3,000 a year in actual tax savings. Talk to a CPA who knows rental real estate for how this applies to your specific situation.

How much principal does my mortgage pay down in year one?On a $225,000 loan at 7%, about $2,400 in principal is paid down in year one, or about $200 a month. That equity is being built by your tenant's rent payment, not out of your own pocket. It compounds over time as more of the fixed payment shifts toward principal in later years.

Are rental properties worth it if they only break even on cash flow?Yes, if you understand the full picture. Cash flow is just one of four returns a rental property generates. The other three are tax savings from depreciation, principal paydown funded by the tenant, and long-term appreciation. On the $300,000 example in this post, those three returns add up to roughly $1,400 a month, or about $16,800 a year, representing around a 22% total return on the $75,000 down payment in year one alone.

What are the four returns of rental property investing?The four returns are cash flow (rent minus all expenses), tax benefits (primarily depreciation, which reduces taxable income without requiring cash spending), principal paydown (the portion of each mortgage payment that reduces the loan balance, paid by the tenant), and appreciation (the property's increase in value over time). Most first-time landlords only track the first one. Long-term investors track all four.

How much should I budget for a capital expenditure reserve on a rental property?Budget about 5% of monthly rent into a capital expenditure reserve. On a $2,500 a month rental, that's $125 a month. This covers the eventual replacement of major systems like the roof (which can cost $15,000 to $20,000), HVAC ($8,000 to $12,000), water heater, and appliances. These costs don't show up every year, but they do show up, and having the reserve means you're not putting a roof on a credit card.

Where to Go from Here

The full breakdown of the four returns of rental property investing, including examples across multiple property types, is in chapter 12 of my book, How to Rent Your Home.

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