What Is Cash Flow in Real Estate?

Cash flow is the money you have left after all expenses are paid on a property.

👉 In simple terms:

Cash flow = Income – Expenses

💰 The Basic Formula

Cash Flow=Rental Income−Total Expenses\text{Cash Flow} = \text{Rental Income} - \text{Total Expenses}Cash Flow=Rental Income−Total Expenses

If the result is:

• Positive → You make money monthly

• Negative → You pay out of pocket

📊 Real Example

Let’s say:

• Rent income: ₱25,000/month

• Expenses:

  • Mortgage: ₱15,000

  • Taxes/insurance: ₱3,000

  • Maintenance: ₱2,000

👉 Total expenses = ₱20,000

✔ Cash flow = ₱5,000/month profit

🧾 What Counts as Expenses?

Don’t just think mortgage. Include everything:

• Loan payment

• Property taxes

• Insurance

• Maintenance & repairs

• HOA fees (if any)

• Property management (if hired)

👉 Missing these = wrong calculations

🟢 Positive vs 🔴 Negative Cash Flow

🟢 Positive Cash Flow

• Property pays you monthly

• Lower risk

• Ideal for beginners

🔴 Negative Cash Flow

• You pay monthly to hold property

• Can still work if:

  • Property appreciates

  • Rent increases over time

🧠 Why Cash Flow Matters

Cash flow determines:

• If your investment is sustainable

• If you can scale and buy more properties

• Your actual monthly income

👉 It’s the difference between:

• Owning property

  
  

  vs

• Owning a profitable asset

⚠️ Common Beginner Mistakes

• Overestimating rental income

• Underestimating maintenance costs

• Ignoring vacancy periods

👉 Always be conservative with numbers

🏁 Bottom Line

• Cash flow = your real profit each month

• Positive cash flow = safer, income-generating investment

• Smart investors focus on numbers, not just property looks