Cash flow is an English term that refers to a set of cash flows that allows you to measure the financial performance of your business. This expression is often used in the field of real estate investment, especially since it directly impacts the financial health of your business. So what is cash flow in real estate? How do you get positive cash flow to keep making money on your investment?
In the field of real estate, cash flow is a way of evaluating the interest of investing in a property in relation to its purchase price. Clearly, the higher the net return, the better the return on investment. Indeed, as a good real estate investor, you must derive maximum income from the rental of your property after deducting all costs and charges. These fixed expenses include mortgage payments, carrying costs, operating costs… Thus, the rental income must cover your total expenses and generate excess cash as income to estimate a profitable rental property.
The interest of any real estate investment is to offer you the possibility of enriching yourself and certainly not of impoverishing you. In other words, you must always generate a positive cash flow on your rental investment. At the end of each month, your property must give you money, which you can use in different ways:
To learn more about the importance of cash flow in real estate, we can only advise you to find out more on the net or from real estate professionals.
If your cash flow is negative, this implies that you necessarily pay more charges than you receive in income (rent). However, this situation has direct consequences on your financial health, knowing that you have to put money back out of your pocket every month. You will therefore be forced to reduce your daily expenses in order to finance the work on your property.
In general, real estate cash flow is a function of three main factors: