Cashflow is the actual money flowing in and out of your investment property each month or year. It's the difference between what you collect in rent and what you pay in expenses.
The Formula
Cashflow = Income - Expenses
Income:
- • Rental income
- • Tax savings (from AfA and interest deductions)
Expenses:
- • Mortgage interest
- • Mortgage principal repayment
- • Property management fees
- • Maintenance and repairs
- • Property tax
- • Insurance
Positive vs. Negative Cashflow
Positive cashflow: Your property generates more income than expenses. You pocket money each month.
Negative cashflow: Your expenses exceed your income. You pay out of pocket each month.
Is Negative Cashflow Always Bad?
Not necessarily!
Many successful investors accept negative cashflow early on if:
- • They can afford it from their salary
- • The property is appreciating in value
- • The mortgage will be paid down over time
- • Rents will likely increase in the future
Think of it like a monthly investment into a fund—except it's real estate that you own.
Real Example
Monthly Cashflow Calculation:
Rent collected:+€1,800
Tax savings (monthly):+€280
Mortgage payment:-€1,650
Property management:-€180
Maintenance reserve:-€150
Net Cashflow:+€100/month