How to calculate cash flow on investment property

Every investor needs insight on how to calculate the cash flow of his or her investment property; but first, what is cash flow and what is an investment property?

WHAT IS CASH FLOW?

Cash flow is the grand total amount of cash and cash equivalents that moves in or out of an investment. Any cash or asset that can easily be converted to money and that can be used to run the activities related to the investment all contributes to the cash flow of that investment. The cash flow can either be positive of negative. When it is positive, it indicates that the company’s liquid assets are on the high side (increasing); if it is negative, it means that the company’s liquid assets are on the low side (decreasing).

WHAT IS AN INVESTMENT PROPERTY?

An investment property is a real estate asset purchased with the intention of making some returns from it by renting it out, reselling the property, or both. A lot of people make this sort of investments all the time seeing as they turn out high profits in most of the cases. It is important to note that not all cases of investment property turn out fine. So it is important that investors conduct studies to determine the best and most profitable use of a property.

CASH FLOW FROM INVESTING:

Basically, to calculate the cash flow of an investment property, one needs to make use of the investment calculator, which is a lot easier to work with than to go on the manual method. With the calculator, an investment will be able to figure out monthly cash flows bases on mortgage and rent payments, and as well real cash flow of the property. It takes into consideration factors like

-    Mortgage

-    Payments

-    Property management

-    Insurance

-    Taxes

-    Vacancy

-    Maintenance

If the investor wants to sell off an investment property but does not know how to cost it, the cash flow investment calculator can help out. It has a table with a suggested value of the property being evaluated based on information provided about the age and the condition of the home.

This can actually come in handy, not just for the seller of the property, but also for the buyer. It accounts for the expenses one may encounter when owning a rental property or even one that has been completely paid for. To get a more reliable idea of cash flow, there is need to consider maintenance, vacancies and property management, and the calculator is programmed to put all of that into consideration.

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

Start Trading
Follow us in social networks!
Live Chat
Leave feedback