Cash flow

Cash flow is what is left after you pay for the rental. Start with rent collected. Subtract operating costs such as repairs, insurance, taxes and management fees, then subtract the mortgage payment. If the result is positive, the home pays you each month. If it is negative, you add money to keep it.

As an illustration, if a home collects $2,000 in rent and costs $1,700 in loan and expenses, cash flow is $300 a month. That is an example only. Real numbers swing with repairs and vacancy rate, so keep a maintenance reserve in mind.

Cash flow differs from net operating income, which comes before the mortgage. Owners often track both. Track cash flow for each year, not only the best month, because one big repair can erase months of profit. Our guide on the cost of self-managing shows the costs owners often forget.