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Cash Flow Formula:
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Cash flow in real estate refers to the net amount of cash generated by a rental property after accounting for all operating expenses and mortgage payments. It's a key metric for evaluating the profitability of an investment property.
The calculator uses the cash flow formula:
Where:
Explanation: Positive cash flow indicates the property generates more income than expenses, while negative cash flow means expenses exceed income.
Details: Calculating cash flow helps investors determine a property's profitability, assess risk, and make informed investment decisions. It's crucial for long-term investment sustainability.
Tips: Enter all values in dollars. Be sure to include all operating expenses and the full mortgage payment. The calculator will show the monthly cash flow result.
Q1: What is considered good cash flow in real estate?
A: Generally, $100-$200 per door per month is considered good cash flow, though this varies by market and property type.
Q2: Should I include property management fees in operating expenses?
A: Yes, all property-related expenses should be included, whether you self-manage or use a property manager.
Q3: How does vacancy affect cash flow?
A: Vacancy should be accounted for either by reducing rental income or including it as an operating expense (typically 5-10% of rent).
Q4: Is positive cash flow always better?
A: Not necessarily. Some investors accept negative cash flow for properties with strong appreciation potential or tax benefits.
Q5: Should I include principal payments in the mortgage amount?
A: Yes, include the full mortgage payment (principal + interest) as this is cash leaving your account each month.