Where rental yield measures the property, cash flow measures your position in it. It answers a blunter question: across a year, does this property put money into your account or take money out — and how much, each week? This guide builds that figure one layer at a time.
If you would rather enter your own numbers than work through the layers, the cash flow calculator produces the weekly and annual result with break-even and scenario views. For the concepts behind the arithmetic, the complete cash flow guide is the companion to this one.
What cash flow actually adds up
Cash flow is a subtraction with three parts: the rent you actually collect, the costs of owning the property, and the cost of the loan that bought it. Get all three onto the same annual basis and the maths is simple.
Annual cash flow = Collected rent − Operating costs − Loan repayments
The three sections that follow take each term in turn. The reason cash flow surprises people is almost never the arithmetic — it is that one of these three is quietly understated.
Start with collected rent, not asking rent
Cash flow begins with the rent that reaches your account, which is not the rent on the lease. Reduce the advertised rent for the vacancy you realistically expect between tenants, because an empty week collects nothing while the costs keep running.
Collected rent = Weekly rent × (52 − vacant weeks)
A property let at $650 a week with two weeks of expected vacancy collects $32,500, not the $33,800 the lease implies. That $1,300 gap is real money, and it is the first place an optimistic cash-flow estimate goes wrong.
Take out the operating costs
Operating costs are everything it takes to hold and let the property, excluding the loan. These are the same costs that separate gross and net yield, and they are easy to under-count because they arrive at different times of the year:
- Council and water rates, and land tax where it applies.
- Landlord insurance and, for units, strata or body-corporate fees.
- Property management fees, usually a percentage of rent collected, plus letting fees when a tenant changes.
- Repairs and maintenance — the lumpy one. Average it across years rather than assuming the quiet year is typical.
For the full account of which costs belong here and how much each one drags the result, see what expenses to include in cash flow.
Take out the loan repayments
This is the line that separates cash flow from yield. Yield ignores the loan on purpose; cash flow cannot, because the loan is usually the single largest outgoing. Two investors can own the identical property at the identical yield and land in completely different cash positions purely because of how they financed it.
Interest-only repayments
You pay only the interest, so repayments are lower and cash flow looks stronger — but you are not reducing the debt. Common while investors prioritise holding power.
Principal & interest repayments
You pay interest plus a slice of the loan, so repayments are higher and cash flow tighter — but part of that outgoing is building equity, not vanishing.
Because the loan matters this much, it has its own guide: how your loan affects cash flow covers interest rates, loan type and term in detail.
Convert to the weekly number
The annual figure is correct, but investors live week to week, so the number that actually informs a decision is the weekly one. Divide the annual result by 52.
Weekly cash flow = Annual cash flow ÷ 52
A property that is $4,160 a year negative costs you $80 a week to hold. That is the figure to weigh against your budget — a real, pre-tax amount leaving your account every week. Akweno deliberately leads with this weekly, pre-tax number because it is the one you feel; tax effects come afterward, in pre-tax vs after-tax cash flow.
A full worked example
A $750,000 property is let at $650 a week. Assume two weeks of vacancy, annual operating costs of $6,500, and an interest-only loan of $600,000 at 6.5%.
- Collected rent: $650 × 50 = $32,500
- Less operating costs: −$6,500
- Less loan interest: $600,000 × 6.5% = −$39,000
- Annual cash flow: $32,500 − $6,500 − $39,000 = −$13,000
- Weekly cash flow: −$13,000 ÷ 52 = −$250
This property is negatively geared: it costs $250 a week to hold, before any tax benefit. Whether that is acceptable depends entirely on your strategy and the growth you expect — which is the judgement covered in what is good cash flow.
Mistakes that flatter the number
- Using asking rent and 52 weeks. The single most common error — it ignores vacancy and overstates the rent that reaches you.
- Forgetting the lumpy costs. Insurance, land tax and the year the hot-water system fails are all real; averaging maintenance keeps the number honest.
- Using interest-only forever. If the loan reverts to principal and interest in a few years, model that — repayments jump.
- Counting the tax refund as income. A negative-gearing benefit reduces the pain; it does not turn a negative property positive. Keep pre-tax and after-tax separate.
- Ignoring rate rises.A cash-flow figure at today's rate is a snapshot. Stress-test it, as covered in building a cash flow buffer.
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