How to Analyze a Property for Cash Flow

Make Sure Your Rental Investment Pays You Back

When it comes to real estate investing, cash flow is king. It’s what separates a profitable rental property from a money pit. But how do you actually determine if a property will produce positive cash flow before you buy?

Here’s a step-by-step guide to help you analyze a property for cash flow—and make smarter investment decisions.

What Is Cash Flow in Real Estate?

Cash flow is the money left over each month after all your rental property expenses are paid.

Monthly Rental Income

– Operating Expenses

– Mortgage Payment  

= Monthly Cash Flow

If the number is positive, you’re making money. If it’s negative, you’re losing money each month.

Step 1: Estimate Monthly Rental Income

Start by researching rental rates for similar properties in the area. Use:

• Online rental sites (Zillow, Rentometer, Facebook Marketplace)

• Local property managers

• Active listings in the same neighborhood

Be conservative—base your estimate on average rents, not the highest.

Step 2: Add Up Operating Expenses

Common monthly or annual expenses include:

Expense	Estimate
Property Taxes	Varies by location
Insurance	₱1,500–₱5,000/month
Maintenance & Repairs	~5–10% of rental income
Property Management (if hired)	~8–12% of rent
Vacancy Allowance	~5% of rent
Utilities (if landlord-paid)	Depends on property type
HOA Fees	If applicable

Add them up to get your total monthly operating expenses.

Step 3: Factor in Financing Costs

If you’re using a mortgage, calculate your monthly principal and interest payments using an online mortgage calculator.

Don’t forget to include:

• Down payment

• Loan term

• Interest rate

• Private mortgage insurance (PMI), if applicable

Step 4: Run the Numbers

Example:

• Monthly rent: ₱30,000

• Operating expenses: ₱10,000

• Mortgage payment: ₱15,000

Cash Flow: ₱30,000 – ₱10,000 – ₱15,000 = ₱5,000/month

That’s positive cash flow!

Bonus Metrics to Consider

Cash-on-Cash Return

Measures how much return you're earning on your actual cash investment.

Annual Cash Flow ÷ Total Cash Invested = Cash-on-Cash Return

Cap Rate

Useful for comparing multiple properties.

Net Operating Income ÷ Property Value = Cap Rate

Look for a cap rate of 5–10% depending on the market and your risk tolerance.

Common Mistakes to Avoid

• Overestimating rent potential

• Underestimating expenses

• Ignoring vacancy and maintenance costs

• Not factoring in property management

• Letting emotions drive the deal

Final Thoughts

Cash flow is the foundation of a strong rental investment. By analyzing each property carefully, you can avoid costly surprises and build a portfolio that generates steady income over time.

Need help evaluating a potential rental or finding cash-flow-positive properties in your area? Let’s connect—I’d be happy to help!