1. What is Cash Flow in Real Estate?

Cash flow in real estate refers to the net amount of cash generated by a rental property after accounting for all expenses and mortgage payments. It's a key metric for evaluating the profitability of an investment property.

2. How Does the Calculator Work?

The calculator uses the cash flow formula:

Where:

• Rental Income — Total monthly income from rent and other property-related income
• Expenses — All property-related expenses (taxes, insurance, maintenance, etc.)
• Mortgage Payment — Monthly principal and interest payment

Explanation: Positive cash flow indicates the property generates more income than expenses, while negative cash flow means it's costing money to operate.

3. Importance of Cash Flow Calculation

Details: Calculating cash flow helps investors determine if a property will be profitable, assess risk, and make informed investment decisions.

4. Using the Calculator

Tips: Enter all values in dollars. Be sure to include all potential expenses to get an accurate cash flow projection.

5. Frequently Asked Questions (FAQ)

Q1: What is considered good cash flow for a rental property?
A: This varies by market, but generally $100-$200 per door per month is considered good for single-family properties.

Q2: Should I include vacancy in expenses?
A: Yes, it's recommended to include 5-10% of rental income as a vacancy expense to account for periods when the property is unoccupied.

Q3: What expenses should I include?
A: Include property taxes, insurance, maintenance, repairs, property management fees, utilities (if paid by owner), and capital expenditures.

Q4: How does cash flow differ from profit?
A: Cash flow measures actual money coming in and out each month, while profit considers additional factors like depreciation and amortization.

Q5: Is positive cash flow always better?
A: Not necessarily. Some investors accept negative cash flow in appreciation markets where property values rise significantly over time.