Real Estate Investing Glossary

Cash Flow

Last reviewed July 15, 2026

Cash flow is the money left from rental income each period after paying all operating expenses, reserves, and the mortgage.

What is cash flow?

Cash flow is the spendable profit a rental property produces, what remains from rent after every bill is paid, including operating expenses (taxes, insurance, management, maintenance, vacancy) and the full mortgage payment. Positive cash flow means the property pays you every month; negative cash flow means you pay it.

Careful investors also budget reserves for capital expenditures, roofs, HVAC, water heaters, when calculating cash flow, even though those costs arrive irregularly. A property that "cash flows $300 a month" before reserves may really break even once a $9,000 roof every 20 years and periodic appliance replacements are spread across the months.

Cash flow is only one of four ways rentals build wealth, alongside appreciation, loan principal paydown, and tax benefits. But it is the one that keeps you in the game: properties with durable positive cash flow can be held through downturns, while negative-cash-flow bets depend on prices rising on schedule.

Formula

Cash flow = gross rental income − operating expenses − capex reserves − debt service

Worked example

A rental collects $1,800 per month. Operating expenses average $650, capex reserves $150, and the mortgage payment (principal, interest, taxes, insurance) is $820. Monthly cash flow = $1,800 − $650 − $150 − $820 = $180, or $2,160 per year.

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Frequently asked questions

How much cash flow should a rental property make?: A common target is $100 to $300 of monthly cash flow per single-family unit after realistic expenses and reserves, though the right number depends on your cash invested, the yield it represents, matters more than the raw dollars. $200 a month on a $30,000 investment is an 8% cash-on-cash return; the same $200 on $120,000 invested is only 2%.
Is negative cash flow ever acceptable?: Some investors deliberately accept modest negative cash flow in strong-appreciation markets, betting total returns will outweigh the monthly loss. That is a speculative position: it requires reliable outside income to feed the property and enough reserves to survive vacancies and rate changes. Most first-time investors are better served requiring positive cash flow after honest expense estimates.

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What is cash flow?

Frequently asked questions

How much cash flow should a rental property make?

A common target is $100 to $300 of monthly cash flow per single-family unit after realistic expenses and reserves, though the right number depends on your cash invested, the yield it represents, matters more than the raw dollars. $200 a month on a $30,000 investment is an 8% cash-on-cash return; the same $200 on $120,000 invested is only 2%.

Is negative cash flow ever acceptable?

Some investors deliberately accept modest negative cash flow in strong-appreciation markets, betting total returns will outweigh the monthly loss. That is a speculative position: it requires reliable outside income to feed the property and enough reserves to survive vacancies and rate changes. Most first-time investors are better served requiring positive cash flow after honest expense estimates.