Cashflow

In property investment, cashflow refers to the net cash a property produces or consumes in a given period, typically annually. It's the working-capital reality of an investment: what actually hits (or drains) your bank account after everything: rent, interest, rates, insurance, management, maintenance, tax effects.

A positive cashflow property produces surplus cash for the investor after all expenses. A negative cashflow property requires the investor to top up from other income. In Australia with interest rates above 6%, most investment properties are negatively cashflowed before tax, and many remain so after accounting for negative gearing tax benefits and depreciation.

Calculating cashflow properly requires modelling every component: rental income (with realistic vacancy), all operating expenses, mortgage interest (the largest expense for most leveraged properties), tax effects of negative gearing, and depreciation. A back-of-envelope check using gross yield versus mortgage rate is a useful filter but rarely accurate.

Cashflow should be stress-tested. A property that's cashflow-neutral at 6% interest may bleed heavily at 7.5%. The properties that survive every rate cycle are those where the maths works even under adverse conditions, not just the current ones.