Rental Property Cash Flow Calculation

Cash Flow Formula:

\[ \text{Cash Flow} = \text{Rental Income} - \text{Operating Expenses} - \text{Mortgage} \]

Cash Flow:

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1. What Is Rental Property Cash Flow?

Rental property cash flow is the net amount of money that remains after all expenses associated with the property have been paid. It's a key metric for real estate investors to evaluate the profitability of an investment property.

2. How Does The Calculator Work?

The calculator uses the cash flow formula:

\[ \text{Cash Flow} = \text{Rental Income} - \text{Operating Expenses} - \text{Mortgage} \]

Where:

Rental Income — Total monthly rental income from the property
Operating Expenses — All monthly expenses including maintenance, taxes, insurance, etc.
Mortgage — Monthly mortgage payment including principal and interest

Explanation: This calculation shows how much money the property generates each month after accounting for all expenses.

3. Importance Of Cash Flow Calculation

Details: Positive cash flow indicates a profitable investment that can cover expenses and generate income. Negative cash flow means the property is costing money each month. This calculation helps investors make informed decisions about property investments.

4. Using The Calculator

Tips: Enter all values in dollars. Be sure to include all relevant expenses to get an accurate cash flow calculation. All values must be non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is considered a good cash flow for a rental property?
A: Generally, a cash flow of $100-$200 per door (unit) per month is considered good, though this varies by market and property type.

Q2: Should I include vacancy rate in my calculation?
A: Yes, it's recommended to account for vacancy by reducing your rental income by 5-10% to get a more realistic cash flow projection.

Q3: What expenses should be included in operating expenses?
A: Include property taxes, insurance, maintenance, repairs, property management fees, utilities (if paid by owner), and any HOA fees.

Q4: How does mortgage type affect cash flow?
A: Fixed-rate mortgages provide predictable payments, while adjustable-rate mortgages can change, affecting your cash flow over time.

Q5: Is positive cash flow always better?
A: While positive cash flow is generally desirable, some investors may accept negative cash flow in appreciating markets where property values are rising significantly.