Lesson 7: Cash Flow Basics - Understanding Rental Property Finances

What is Cash Flow?

Cash flow is the money left over each month after paying ALL expenses on a rental property. Positive cash flow = making money. Negative = losing money.

The Cash Flow Formula

Monthly Rent - All Monthly Expenses = Cash Flow

Real Example - San Antonio Rental

Monthly Rent:$1,800

Expenses:

Mortgage (P&I):-$850

Property Taxes:-$300

Insurance:-$125

Maintenance (5%):-$90

Vacancy (5%):-$90

Property Management (8%):-$144

MONTHLY CASH FLOW:$201

The 1% Rule (Quick Screen)

A quick way to check if a rental might cash flow:

Monthly Rent ≥ 1% of Purchase Price

✓ Passes 1% Rule

$180K house → $1,800+ rent

✗ Fails 1% Rule

$300K house → $1,800 rent (0.6%)

Why Closers Need to Know This

Landlord buyers care about cash flow, not ARV
Properties in landlord ZIP codes sell to different buyers
You can use 75% rule for landlord deals (they need less margin)
High cash flow properties are easier to assign

Key Takeaway

Cash flow is king for landlords. When you find a property in a rental ZIP code, think cash flow first, ARV second. Present deals with rent estimates to attract landlord buyers.