Monday, June 16, 2014
Landlord Monday: Calculating Cash Flow
Hey, fellow landlord, what's the point of investing if you're not making money? It's kind of a big deal.
Since we can't count on property values going up, you have to be able to make money every month. That means cash flow. Simply put, rent minus expenses.
But some of those expenses need to be accounted for each month, even if you don't spend the same every month (like property taxes). So it is a bit more complicated than you might think.
Fortunately, calculating cash flow is still math, just with a little more thought. Like this.
All I can say is that this is a needed exercise you need to do BEFORE you buy the property. And you need to do it right, like the guy in the linked article does. Things like property taxes, a new roof, vacancies, and the like have to be completely considered. It takes time and effort. It's worth it.