Accurately calculating property cash flows is the cornerstone to successful rental property investing. Doing an accurate rental property cash flow analysis allows you to concentrate your time and attention on deals which produce solid cash flows while simultaneously avoiding detrimental property money-losing transactions. This principle applies to all real estate, not just rentals. Here are a few helpful tips to ensure that you are doing an accurate cash flow analysis on your investment property properties.
The first tip to doing an accurate rental property cash flow analysis is to use a professional cash flows calculator. These calculators can be found online or within any real estate software program. They are easy to use and provide excellent information when it comes to calculating the potential income from a property’s rental activity. You simply enter the amount of rent received each month, the average number of days it takes for that rent to cover all expenses, and the net profit or loss over the course of the year.
Rental Property Cash Flow Analysis Template
This spreadsheet is for people who are thinking about purchasing rental property for the purpose of cash flow and leverage. It is a fairly basic worksheet for doing a rental property valuation, including calculation of net operating income, capitalization rate, cash flow, and cash on cash return.
Real estate investing is a volatile business. Potential investors must do their research and weigh the pros and cons of any investment before making an investment. Many investors choose to make an investment in rental properties because they offer a passive income stream. They do not have to worry about day-to-day operating expenses, maintenance costs, or even paying off the outstanding balance on a mortgage loan. However, when dealing with any kind of business, it is important to remember that you are still responsible for everything that comes along with it, even though the profit from your investment will be much higher than what you would pay out-of-pocket.
Download Cash Flow Analysis Spreadsheets Template
This worksheet is not going to teach you how to be a good real estate investor. It is just a simple tool to help you put into practice some techniques for property valuation and cash flow analysis. Disclaimer: I am not a professional real estate investor. I created this spreadsheet based on experience as a landlord and from various references.