Investing metrics
Cash flow
The cash left over each period after all income is collected and all expenses — including the mortgage — are paid.
Glossary
Investing metrics
Primary references on this page:
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OCC Comptroller Handbook: Commercial Real Estate LendingCash flow is the money a rental actually puts in — or takes out of — your pocket. Start with the rent you collect, subtract operating expenses, then subtract debt service (your mortgage principal and interest). What’s left is cash flow: positive means the property pays you, negative means you feed it each month.
Cash flow differs from NOI, which stops before the mortgage, and from taxable income, which factors in non-cash items like depreciation. Setting aside reserves for vacancy, repairs, and capital expenses is what separates durable cash flow from a number that looks healthy until the first big bill lands.
Build a cash bridge for one stated period
Suppose a unit collects $2,600 in rent during a month, pays $900 of operating bills and $1,500 of principal-and-interest debt service, and assigns $250 to a capital reserve. The operational cash result before the reserve is $200; the owner-available result after the reserve policy is negative $50. Showing both prevents a transfer into savings from being mistaken for an operating expense while still acknowledging that the cash is not available to distribute.
Use actual receipts and cleared or accrued obligations for a historical report. Use explicit assumptions for underwriting. Mixing collected rent from one period, annualized taxes from another, and an aspirational maintenance allowance produces a number that cannot be reconciled or repeated.
Cash flow, NOI, and taxable income answer different questions
NOI stops before financing and many owner-level items. Cash flow includes actual debt service and other cash movements chosen for the analysis. Taxable rental income follows tax rules and can include noncash depreciation while treating mortgage principal differently from interest. A landlord should not move one figure into another report merely because the labels all contain "income."
Use cash flow to test payment capacity, reserve policy, and distributions. Use a downside version with a missed payment, repair, insurance change, or vacancy. A positive base month is not proof that the property can fund an irregular roof, turnover, or deductible.