Quick Answer
Cash flow is what remains after rent comes in and every bill goes out, including the mortgage. Positive cash flow means the property pays for itself and puts money in your pocket; negative cash flow means you're covering the shortfall yourself. It's a core number alongside net operating income when evaluating a rental.
- Includes mortgage
- Yes, unlike NOI
- Positive cash flow
- Property generates surplus income
- Negative cash flow
- Owner covers the shortfall
- Affected by
- Rent, vacancy, expenses, financing
What Counts as an Expense
Calculating cash flow starts with total rental income, then subtracts operating expenses such as property taxes, insurance, maintenance, property management, and an allowance for vacancy, plus the full mortgage payment. What's left is cash flow.
This differs from net operating income, which stops before the mortgage. Two properties can have identical NOI and very different cash flow depending on how each one is financed.
Why Cash Flow Matters to Investors
Cash flow is what actually shows up in an owner's bank account each month, which makes it a practical measure of whether a rental is sustainable. A property can look attractive on paper but still run negative cash flow if the purchase price, interest rate, or rent level don't line up.
Investors weigh cash flow alongside appreciation potential and tax benefits, since a buy-and-hold strategy often accepts thinner early cash flow in exchange for long-term equity growth. Our agents can help you evaluate rental potential on properties across Central Indiana as part of our investment property services.
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Frequently Asked Questions — Cash flow
Is positive cash flow guaranteed on every rental?
No. Cash flow depends on purchase price, financing terms, rent levels, and ongoing expenses, so it has to be run for each specific property rather than assumed.
Does cash flow include vacancy?
A realistic cash flow estimate should build in an allowance for vacancy and turnover, since no rental stays occupied one hundred percent of the time.
Can a property have good NOI but poor cash flow?
Yes. NOI is calculated before the mortgage, so a property with strong NOI can still show weak or negative cash flow once financing costs are included.
How often should I review a rental's cash flow?
Most investors review it at least annually, and whenever rents, taxes, insurance, or financing terms change.