# Cash Flow Formula

**((Cash Flow x # of Units) + Expenses (Taxes, Ins., W/S/G))/.85 (Vacancy+Maint) + Mortgage (Principal + Interest) = Total Gross Rents**

Using the above formula, you can calculate what total rents *SHOULD* be to hit a desired cash flow/unit on any given property.

**Let me run you through an example:**

Let’s say there’s a duplex for sale for **150,000.** I usually work from my DESIRED CASH FLOW per unit, which is **$300/month**, and that tells me how much gross rents should be. Let’s also say you can buy the property using a **25%** down loan. You will need to do some due diligence on utilities, taxes, insurance, and a mortgage at** 120,000** (75% of 150,000). *Here’s the math:*

((300 x 2) + Expenses (125(taxes), 83.33 (ins), 50 (lawn), 160 (w/s/g))/.85 (Vacancy + Maintenance) + 590 (Principal + Interest, 4.25% over 30) *= Total (Required) Monthly Gross Rents*

Running that calculation on the hypothetical duplex at 150,000, the gross monthly rents would need to be **$1,788.04** to be able to **CASH FLOW $300/month/unit.**

That’s $600/month in profit to fund:* a) future investments, b) vacations, c) your housing costs, d) whatever else you want.*

Just to run the analysis one step deeper – looking at this deal, you will **cashflow 600/month OR 7200/year**. You paid 30,000 down, plus some closing costs. Let’s say you have a total of 33,000 cash into the deal. That’s a 22% return on investment **NOT** including **debt paydown** (that mortgage the tenants are paying for you) or **appreciation.** And it’s mostly tax-free money due to write-offs like depreciation.