I am very confused on the best way to compute cash flow.
Is it Income - Mortgage Interest - Expenses? I just about break even if that's the case.
Or do I count the entire mortgage payments I made totaling 14000 in which case my cash flow is -4000. How do I even factor in depreciation into cash flow?
Lumpr wrote:Your model must account for (a) management expense regardless of whether you hire a property manager (your time is money too), (b) vacancy, (c) maintenance, which must including deferred maintenance items not just day-to-day repairs, lawn care, snow removal etc. (you’ll need to replace the roof, water heater, carpet some day), (d) property taxes, (e) insurance, (f) professional fees (tax prep, evictions, etc.), (g) advertising, (h) utilities if landlord is responsible for them and (i) cash reserve.
boshyd wrote:Thanks once again for all the comments. If I use the formulas that Sulvar suggested my numbers look like this:
Cash Flow: -3060
Profitability(Taking into account Depreciation): -6170
Profitability(Without taking into account depreciation): +1030
I can probably improve my profitability by $1500 or so by increasing rents but the numbers still look bad overall. I guess its best I sell for a loss and target more liquid investments.
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