Cash Flow
The net money remaining after all income is collected and all expenses and debt payments are made.
Definition
Cash flow is the amount of money left over after collecting rent and paying all expenses, including the mortgage payment (PITIA), property management, maintenance, vacancy reserve, and capital expenditure reserves. Positive cash flow means the property generates income beyond all costs. Negative cash flow means you're subsidizing the property out of pocket each month. Experienced investors focus on cash flow as the foundation of a sustainable portfolio because appreciation and tax benefits are less predictable. Even a small amount of positive cash flow provides a buffer against unexpected expenses or vacancy.
How This Relates to DSCR Loans
A DSCR above 1.0 indicates positive cash flow. DSCR lenders want to see that the property's income can service the debt, which is essentially a test of cash flow viability.
Related Terms
DSCR (Debt Service Coverage Ratio)
A ratio that measures whether a property's rental income covers its debt payments.
NOI (Net Operating Income)
A property's total income minus operating expenses, before debt service and taxes.
PITIA
The total monthly housing payment: Principal, Interest, Taxes, Insurance, and Association dues.
Vacancy Rate
The percentage of time a rental property is unoccupied and not generating income.
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