Archive for the ‘Cash Flow’ Category


I am often asked how do I figure out monthly cash flow for a duplex?  First we have to define what cash flow means.  Cash flow is commonly referred to as the net income per month after expenses are paid and deducted from the rental income.   The primary expenses can be:

  1. A mortgage payment each month is dependent on the size of the loan and the interest rate.  So, you could use any of the many mortgage calculators online to compute a P&I payment, principal and interest.
  2. Property taxes.  Property taxes will vary depending on the property and taxing jurisdiction.  If you are provided with a yearly figure on property taxes, divide that figure by 12 months.
  3. Insurance.  Home owners insurance is typically required with most lenders.   Insurance is quoted on a yearly premium basis.  So, again take that figure and divide by 12.
  4. HOA.  If you have home owner’s association dues.  Figure that monthly cost.
  5. So,the above list is used to calculate basic cash flow:
    1. Take gross rents per month
    2. minus principal and interest mortgage payments
    3. minus property taxes
    4. minus insurance
    5. minus HOA
    6. =  Basic Cash Flow Per Month

Now to get more advanced, you can figure these additional expenses:

  1. Average monthly maintenance/repair costs (consider $50 to $100+ per month)
  2. Average vacancy cost (consider 5% to 10% or more depending on your area)
  3. Property management fees (if you manage yourself, then it is $zero!)
  4. subtract all the above and then you will have a more precise picture of Cash Flow!

Thanks for reading,

Hong Lee, CCIM

DuplexDianne Team

http://www.DuplexDianne.com for articles and property listings

Not in the Austin, TX area?  Ask us for a duplex Realtor referral in your city!


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Cash Flow

Cash flow means different things to different people.  Cash flow is a primarily function of down payment, mortgage size, and mortgage terms.  So, when someone says “Does it cash flow?”  that really needs to be qualified.  Is the down payment 5%, 10%, 20%, 25% or more?  What are the mortgage terms, regarding the interest rate and length?

What about property taxes, insurance, and potential HOA fees?  How about an estimate for average repair costs?

Some properties cash flow better than others and location plays a big part of it.  Rents can vary widely depending on condition as well.

Cash flow to some may mean $100 positive per month and others $300 positive is considered cash flow.  So, when someone says “Does it cash flow?”  try to qualify that with some numbers and definition of cash flow.

Since interest rates are now at 40 year lows in the 4.75% and 5% range, cash flow can be better than before.  Note that cap rate is independent of mortgage terms, which we will discuss next.

Thanks for reading.

Hong Lee, CCIM

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