How cash flow is calculated
Cash flow = Rent − Vacancy − Operating expenses − Mortgage
Maintenance and capital expense (CapEx) reserves are set as a percentage of rent. They are money you won't spend every month, but roofs, water heaters and turnovers come due eventually. Leaving them out is the most common reason a "cash flowing" rental ends up losing money.
Example
A home rents for $2,200. With 5% vacancy, 5% maintenance, 5% CapEx and 8% management, plus $360 of taxes and insurance and a $1,250 mortgage, monthly cash flow comes to only about $93, or roughly $1,100 a year. That's close to break-even: one repair could wipe out a year of profit.
How much cash flow is enough?
A common target is $100–$300 per door per month after reserves. The right number depends on your price point and how much risk you're carrying.
Common questions
Why is management included if I self-manage?
Your time has a cost, and you may hire a manager later. Including it shows whether the deal still works when you do.
What vacancy rate should I use?
Check local rental data. 5–8% is a common starting point for long-term rentals.