With property investing, you need positive cashflow to keep yourself buoyant. Even though some people might say family is king and number one, this is true in life, but not in business and investing. What is cashflow though? Cashflow depicts the flow of money into and out of your business.
For a buy to let property, there are various sources and drains of your money:
|Money In||Money Out|
Working out your cashflow is simple. Subtract all your outgoings from your incomings. The result needs to be a positive number!
If you have £500 in rent coming in, £250 mortgage with £55 agents fees, £10 insurance £35 void contingency, £30 maintenance all flowing out, you will have a cashflow of a +£120. This is NET Positive Cashflow.
For me personally I always look at net cashflow rather than gross cashflow. Net gives you a clearer understanding of your investment.