valuation
cash flow
Cash flow is the money left over from an income property after collecting rents and paying all operating expenses and debt service. Before-tax cash flow equals net operating income minus mortgage payments of principal and interest. Positive cash flow means the property produces income for the owner; negative cash flow means the owner must contribute money each period. Investors use it to evaluate returns alongside appreciation and tax benefits.
- Exam tip
- Cash flow subtracts debt service; net operating income does not. Using NOI where cash flow is required is a common math mistake.
- Example
- A rental has NOI of $30,000 and annual mortgage payments of $22,000, so its before-tax cash flow is $8,000.
Related terms & state variants
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Last verified: 2026-10-23