How Do You Calculate Cash Flow From Rental Property?
Many entrepreneurs invest in rental property as a way of boosting both their income and their net worth. Rental property is often a favorite investment because it produces income while also historically appreciating in value. But how can a rental property owner know if a particular property is generating income or costing income? The best measure is the property’s cash flow, which tells the owner exactly how much money the property earns–or costs–over the course of a year. Calculate the amount of income that the property will earn over the course of a year by multiplying the monthly rent by 12 months. For example, if the monthly rent is $800 per month, the annual income for the property will be $9,600 per year (800 x 12 = 9,600). Calculate the property’s annual mortgage or debt expense by multiplying the property’s monthly mortgage payment by 12 months. For example, if the mortgage payment on the property is $325 per month, the annual mortgage expense for the property will be $3,900
