What Is Cash Flow in Real Estate?
Cash flow is the money left over after you collect rent and pay every expense associated with owning the property. Positive cash flow means the property earns more than it costs. Negative cash flow means you're paying out of pocket every month to keep it.
Most beginners only subtract the mortgage payment from rent and call it cash flow. That's dangerously wrong. Real cash flow accounts for property taxes, insurance, vacancy, maintenance, property management, and sometimes HOA fees. Miss any one of these and your "profitable" deal could be losing money.
The Cash Flow Formula
Cash Flow = Rent − Mortgage − Taxes − Insurance − Vacancy − Maintenance − Management
Each component matters. Here's what experienced investors budget for each:
- Mortgage (P&I)
30-year fixed at current investor rates (6.5-7.5%). This is usually the largest expense.
- Property Taxes
Varies wildly by state. Texas ~1.8%, Florida ~0.86%, New Jersey ~2.4%. Always check county records.
- Insurance
Investment property insurance costs 20-30% more than primary residence. Budget $100-200/month.
- Vacancy (5-8%)
Even great properties sit empty between tenants. 5% minimum, 8% in high-turnover markets.
- Maintenance (5-10%)
Ongoing repairs. 5% for newer properties, 10% for pre-1980 construction.
- Property Management (8-10%)
Include this even if you self-manage. It's the true return on the property, not your labor.
- HOA (if applicable)
Condos and townhomes: $100-400+/month. This alone can kill cash flow.
For a deeper breakdown of each expense category, read our complete guide to cash flow analysis.
What's a Good Cash Flow Number?
There's no universal answer, but here are the benchmarks most investors use:
Negative Cash Flow
Below $0/mo
Losing money. Walk away unless you're betting on appreciation.
Break Even
$0 – $200/mo
Tenant pays expenses. You build equity but no income.
Strong Cash Flow
$200+ /mo per door
The target for most buy-and-hold investors.
$200/month per unit is the widely-used benchmark. A single-family home generating $200/mo cash flow is decent. A duplex generating $400/mo ($200 per door) is strong. The best deals on RealixData regularly exceed $500/month.
Cash Flow vs. Cap Rate vs. Cash-on-Cash Return
These three metrics are related but measure different things:
| Metric | What It Measures | Includes Mortgage? |
|---|---|---|
| Cash Flow | Dollars in your pocket each month | Yes |
| Cap Rate | Property's return if paid all cash | No |
| Cash-on-Cash | Return on your actual dollars invested | Yes |
Cash flow tells you the monthly number. Cap rate lets you compare properties regardless of financing. Cash-on-cash return tells you how hard your down payment is working. Use all three together. Learn more about cap rates here.
Real Example: Is This Deal Worth It?
Purchase Price
$225,000
Monthly Rent
$2,100/mo
Market
Jacksonville, FL
At $225K with 7% rates, this property barely breaks even. But if you negotiate down to $210K, cash flow jumps to +$97/mo. Or if you self-manage (remove the 8% fee), it's +$165/mo. The numbers are tight, but they're real.
Try plugging these numbers into the calculator above and adjusting them. That's exactly how investors evaluate deals in practice — tweaking assumptions until they find where the deal works (or doesn't).
Want to see more deals like this? Browse live properties with instant cash flow analysis in Jacksonville, FL, Tampa, FL, or Atlanta, GA.
Common Cash Flow Mistakes
- Using owner-occupied mortgage rates (investor rates are 0.5-1% higher)
- Forgetting vacancy reserves — even one empty month can wipe out months of cash flow
- Not budgeting for maintenance on older properties (10% minimum for pre-1980)
- Ignoring HOA fees, especially on condos where they can exceed $300/month
- Assuming rents never drop — always stress-test with a 10% rent reduction
- Confusing cap rate with cash-on-cash return (they measure different things)
Analyze Real Properties Instantly
This calculator gives you the formula. RealixData gives you the data. We automatically calculate cash flow, cap rate, cash-on-cash return, and our proprietary Deal Score (0-100) for every listed property across the U.S. — no manual data entry required.