What is cash flow? Well, cash flow is the amount of money you have left over after you pay all of your bills. To get your cash flow on any property, you have to know a few things. These things are your gross income your expenses and your amount of all of your bills, or your debt.
So how do you figure your cash flow?
I have touched on this before but it is easy to remember once you get the hang of it. It looks like this:
You have a property that rents for $800 a month (gross income).
Your loan payment is $300 a month
You have other expenses totaling $160. (This is about 20% of your gross income).
Your cash flow is 800 - 300-160 = $340 cash flow each month.
Calculating your expenses can vary. I have seen figures as high as 30% per month used for this calculation. It is better to overestimate this number just so you can make sure you have positive cash flow.
You can also find out your return on your investment by dividing your annual cash flow by your down payment on the property. This will give you your % return on the property.
I don’t try and have a huge cash flow with property. I want to try and pay down my loan faster so that if I want to hold on to my property for several years, the property will bring me even more income then. I don’t want to work just as hard or harder as I get older. As you get older, you want more of your money to work for you so you can enjoy life. It will be important that you have a lot of equity at that point on your life.
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