Glossary
Cash flow (rental cash flow)
Cash flow is the rent left over each month after the mortgage and every operating cost, including reserves for vacancy, repairs and capex.
Positive cash flow pays you to hold the property. Negative cash flow means you feed the property every month. It is the number that decides whether a rental is sustainable.
Investors usually look at cash flow per door, per month. Run The Deal scores $200 a month per door as good and $50 as marginal for a buy and hold rental by default. Those are planning targets you can change.
How to calculate it
Run The Deal builds it in this order: rent, minus vacancy, minus operating costs gives NOI. Then cash flow = NOI minus the capex reserve minus principal and interest.
- Rent
- $2,000.00
- Vacancy (5%)
- minus $100.00
- Repairs (5%)
- minus $100.00
- Management (8%)
- minus $160.00
- Taxes
- minus $200.00
- Insurance
- minus $120.00
- Capex reserve (5%)
- minus $100.00
- Principal and interest
- minus $997.95
Percentages are Run The Deal's defaults. Loan terms are illustrative.
Common mistakes
- Calling rent minus mortgage cash flow. Vacancy, repairs and capex are real costs even in months you do not pay them.
- Using today's tax bill on a house that will be reassessed.
- Ignoring a stress test. Run The Deal also shows cash flow with rent 10% lower.
Cash flow vs DSCR
DSCR compares rent to the payment only. A deal can pass a lender's DSCR test and still have thin cash flow after the other costs. Check both.
Get a full monthly breakdown in the rental property calculator.
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