1. What is Cash Flow in Real Estate?

Cash flow is the net amount of cash being transferred into and out of a property investment. Positive cash flow indicates that a property is generating more income than expenses, while negative cash flow means expenses exceed income.

2. How Does the Calculator Work?

The calculator uses the basic cash flow formula:

Where:

• \( NOI \) — Net Operating Income: Gross income minus operating expenses (excluding financing costs)
• \( Debt Service \) — Total of all mortgage payments (principal + interest)

Explanation: This simple calculation shows how much money the property generates after paying operating expenses and mortgage payments.

3. Importance of Cash Flow Calculation

Details: Cash flow analysis is essential for real estate investors to evaluate property performance, assess risk, and make informed investment decisions.

4. Using the Calculator

Tips: Enter your property's NOI (annual or monthly) and total debt service payments in the same time period (both annual or both monthly).

5. Frequently Asked Questions (FAQ)

Q1: What's considered good cash flow in real estate?
A: Generally, positive cash flow is good, but ideal amounts vary by market. Many investors aim for $100-$200 per door per month in positive cash flow.

Q2: How is NOI different from gross income?
A: NOI subtracts operating expenses (taxes, insurance, maintenance, etc.) from gross income but doesn't include financing costs or capital expenditures.

Q3: Should I include property management fees in NOI?
A: Yes, property management fees are considered an operating expense and should be included in the NOI calculation.

Q4: What if my cash flow is negative?
A: Negative cash flow means you're supplementing the property's expenses from other sources. This might be acceptable if you expect strong appreciation.

Q5: How does cash flow differ from profit?
A: Cash flow measures actual money movement, while profit is an accounting concept that includes non-cash items like depreciation.