Definition
Cash flow is the actual money remaining after collecting rent and paying all expenses (except principal/interest). Positive cash flow is the lifeblood of rental investing.
Where you’ll meet it
Will the rental income actually cover anything?
See it in Buying a second home · Step 4About this term
Positive cash flow means the property generates more cash than it consumes, providing actual income. Negative cash flow requires the investor to contribute money from other sources. Cash flow is the lifeblood of rental property investing as it funds operations and investor returns. Understanding monthly, annual, and seasonal cash flow patterns is crucial for financial planning.
Pro Tip
Always maintain cash reserves (6-12 months expenses) to cover vacancies and unexpected repairs.
Example
A property with $5,000 monthly rent, $1,200 expenses, and $2,500 mortgage payment has positive cash flow of $1,300/month