What does "cash flow" refer to in real estate investments?

In real estate investments, cash flow is defined as the net amount of cash that is generated or consumed by a property over a specific period. This includes all income received from the property, such as rental income, minus all expenses incurred, including management fees, property taxes, maintenance costs, and financing costs. The key aspect of cash flow is that it reflects the actual cash available to the owner after accounting for all inflows and outflows.

Understanding cash flow is critical for investors as it determines the profitability and financial health of a property. Positive cash flow indicates that a property is generating more income than expenses, which can be reinvested, used to pay down debt, or distributed to investors. Conversely, negative cash flow suggests that expenses exceed income, which could put the investment at financial risk.

In this context, total revenue from property sales pertains more to a capital gain rather than ongoing cash flow from operations. Debt payments specifically refer to the cash outflow for servicing loans and are only one aspect of calculating cash flow. Reserves set aside for property maintenance represent funds that are not available for distribution or other investments, thus they wouldn't accurately reflect the real-time cash flow of the property.