Calculating Rental Cash Flow

| November 12, 2008 More

Landlords need to be able to calculate the cash flow from their rental properties to make sure they’re charging a profitable rent and to weight future investments.

If you want to figure out what your rental cash flow is you’ll first need to calculate the amount of rent you expect to get from the tenants. If you own multiple units you may want to figure in a vacancy rate, some experts suggest a 5% unoccupancy rate is reasonable, but this depends on your property and its desirability.

Once you figure out what you expect to receive in rent then you’ll need to figure out your property losses. This means you’ll want to calculate the expenses of the property operations, any depreciation and mortgage interest expenses.

Then take your expected rent income and subtract the above expenses to figure your tax savings or losses. Add or subtract that tax result from the amount expected from your renters, subtract again your operating expenses and your mortgage payments. This is your cash flow.

Once you’ve determined your cash flow you can use that number to determine what price you should establish for renters or if a new investment property is worth the investment.

Category: Investment Property

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