In real estate, Cash Flow is defined as all of a property’s cash inflows minus all of its cash outflows during a given period of time. As a Property Manager one of my goals is to protect my clients Cash Flow by managing their property efficiently and another goal is finding ways to increase their Cash Flow when opportunities present themselves.
Outside of my role here at Capital Street Management my interest for Cash Flow sparked about 5 years ago when I stumbled across a book titled Rich Dad Poor Dad. If you haven’t heard of it, it’s a book about financial literacy with a heavy undertone for investing in Real Estate for financial freedom. and ultimately, Cash Flow.
Now as much as I credit my start in Real Estate to reading Rich Dad Poor Dad, Since then I also learned that there’s a lot more that goes into achieving Cash Flow in real life.
On a basic level The formula for Cash Flow can be used for quickly vetting potential investments. For example, if an investment property brings you positive Cash Flow each month it can be considered an Asset and if an investment property brings you negative Cash Flow each month, it can be considered a Liability. Now, These aren’t traditional financial definitions but they’re good rules of thumb for the sake of keeping things simple.
Building on the foundation of understanding what Cash Flow is and how the formula can be used to make smart decisions, in Part 2 of this series I’m going to share 2 other formulas that will help you further analyze potential Cash Flow opportunities. So stay tuned. I’m Albert with Capital Street Management, thanks for reading this post.
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