Accounting Cash Flow Calculator For Rental Property

Accounting Cash Flow Formula:

\[ \text{Cash Flow} = \text{Rental Income} - \text{Operating Expenses} - \text{Mortgage Payments} + \text{Depreciation} \]

Rental Income:

Operating Expenses:

Mortgage Payments:

Depreciation:

Accounting Cash Flow:

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1. What is Accounting Cash Flow?

Accounting cash flow for rental property is a measure of the net cash generated by the property after accounting for all expenses and income. It's a key metric for evaluating the profitability of a rental property investment.

2. How Does the Calculator Work?

The calculator uses the accounting cash flow formula:

\[ \text{Cash Flow} = \text{Rental Income} - \text{Operating Expenses} - \text{Mortgage Payments} + \text{Depreciation} \]

Where:

Rental Income — Total income from rent payments
Operating Expenses — Costs to maintain and operate the property
Mortgage Payments — Principal and interest payments on the property loan
Depreciation — Non-cash expense that reduces taxable income

Explanation: This calculation shows the actual cash being generated (or lost) by the property after all expenses, while accounting for the tax benefits of depreciation.

3. Importance of Cash Flow Calculation

Details: Positive cash flow indicates the property is generating income after expenses, while negative cash flow means the property is costing money to maintain. This metric helps investors evaluate property performance and make informed decisions.

4. Using the Calculator

Tips: Enter all values in dollars. Be sure to include all operating expenses (maintenance, taxes, insurance, etc.) and accurate mortgage payment information. Depreciation is typically calculated as the property value (excluding land) divided by 27.5 years for residential properties.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between cash flow and profit?
A: Cash flow measures actual money moving in and out, while profit is an accounting concept that includes non-cash items like depreciation.

Q2: How much cash flow is good for a rental property?
A: Generally, $100-$200 per door per month is considered good, but this varies by market and investment strategy.

Q3: Why add back depreciation?
A: Depreciation is a non-cash expense that reduces taxable income but doesn't actually cost money, so it's added back to show true cash flow.

Q4: Should I include principal payments in expenses?
A: Yes, mortgage payments (both principal and interest) should be included as they represent cash leaving your account.

Q5: How often should I calculate cash flow?
A: Monthly calculations are most common, but quarterly or annual calculations can also be useful for long-term planning.