Rental cash flow: definition
Rental cash flow is the amount of cash left after paying all property-related expenses (interest, amortisation, charges, maintenance costs, and taxes on rental income). Positive cash flow means the property is self-financing and generates a monthly surplus.
Cash flow in detail
Even with a good net Calculate rental yield, cash flow that is too low or negative can weaken your position, especially when something unexpected happens (works, rental vacancies, rising rates). The goal is to build a portfolio that combines yield, potential capital gains and sufficient cash flow to absorb shocks.
Example of cash flow calculation
An owner buys a buy-to-let apartment with a decent net yield, but high mortgage instalments. In the end, their cash flow is slightly negative each month. When unexpected works arise, they have to dip into their savings. For a new investment, they will aim to keep cash flow positive for greater security.
