What Is Cash Flow in Real Estate?

Cash flow in real estate is the money left over after a property’s rental income pays all operating expenses and debt payments. Positive cash flow means the property earns money each month, while negative cash flow means it costs money to hold.

How Cash Flow Works in Real Estate

Cash flow is one of the most important metrics for real estate investors. It measures the actual money earned (or lost) after paying expenses and loan costs.

The formula:

Cash Flow = Rental Income − Operating Expenses − Mortgage Payments

  • Includes rent, fees, and other income
  • Subtracts maintenance, taxes, insurance, utilities, and management
  • Subtracts principal & interest if the property is financed
  • Used to assess monthly and annual profitability

Cash Flow Example

A single-family rental earns $2,000 per month in rent. Total monthly operating expenses are $750, and the mortgage payment is $900.

Cash Flow = $2,000 − $750 − $900 = $350/month

This means the property produces $350 in positive monthly cash flow — or $4,200 per year.

Cash Flow vs. NOI vs. Cash-on-Cash Return

  • Cash Flow – Income remaining after expenses and financing
  • NOI – Income after operating expenses, BEFORE mortgage costs
  • Cash-on-Cash Return – Annual cash flow divided by cash invested

Cash flow helps investors understand real monthly profit, while NOI and CoC help evaluate returns and deal quality.

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