Cash flow is the net amount of money a rental property produces after all expenses are paid, including operating costs and debt service such as the mortgage payment. Positive cash flow means the property brings in more than it costs to own each month.
Unlike net operating income, cash flow accounts for financing, so it reflects what the investor actually pockets. It is calculated by taking the property's income and subtracting operating expenses and the mortgage payment, along with any reserves the investor sets aside.
Cash flow is a central goal for many rental investors because it provides ongoing income and a cushion against vacancies and surprises. Negative cash flow means the owner must cover the shortfall out of pocket, betting instead on appreciation.