Smyrna, GA · Member since 2018 · 20 posts · 5 votes
BPers,
I'm trying to calculate my net cash flow and it occurred to me that in the normal formulas we tend to use, we never factor in the tax write offs. If management fees, property tax, interest, depreciation, etc can all be written off (basically given back to us), then why should it be factored into the net cash flow. Am I making sense or am I looking at it completely wrong.
Cash flow is the cash that flows into your pockets from the investment.
You need to calculate it as investment income - expenses (including annual taxes and income taxes on your gains) - increased equity (loan paydown - that is part of your profit, but it isn't part of your cashflow)
If you are looking at this on only a monthly basis, you'll miss annual or semi-annual costs or seasonal variations. Best to figure it for a year and divide by 12 if you want to know the monthly cashflow.
Better yet, calculate it as your cash on cash return, your return on investment, or return on equity. I'd much rather have annual cash flow of $1000 on a $10000 investment than cash flow of $2000 on a $50000 investment.