Cash Flow and Multi-Family Rental Property


Cash is King

Having an investment property that brings in positive cash flow is a great thing.


Fortunately, calculating cash flow is actually pretty easy to do, as long as you use good assumptions and start with solid information.


Start with the net operating income (NOI). Remember that’s the amount that the building “makes” before factoring in the effects of financing.


Then, subtract your principal and interest payments from that NOI. That amount will be your annual cash flow.


Take an example of a building that has net operating income is $18,000 ($1500 each month). The building costs $200,000, and you have a lender who will do 4.5% over a 25 year mortgage with 20% down. Your monthly principal and interest payment on $160,000 is $889. 


That makes your annual cash flow [(1500-889) x12]. Which gives $7212 in annual cash flow.


Is that a good property to own? That’s up to each investor, and there are more variables to consider than cash flow. That’s where your Green Light Real Estate investment property professional can help.

Next article: Operating Expenses and Multi-Family Rental

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