Cash Flow - Purchase Price or Purchase Price Minus Down Payment

[Jeffrey R. White]

Cash Flow Question

I have a CASH FLOW question. I searched the forums for an answer and could not find one. Forgive me if this has been answered.

When calculating cash flow is cash flow based on solely total purchase price, or is it based on purchase price minus down payment? Hypothetically it would look like this

$100,000 property - Put 20% down and finance $80,000

This scenario calculates cash flow on $80,000 ($100,000 less your $20,000 down payment)

Rent $1200 Month

Expenses - $980/ Month (P & I, Taxes, Variable Expenses of Cap Ex, Vacancy, Maintenance, and Management Fees)

$220/Month Cash Flow

11.50% CoC ROI

OR

Include the down payment amount, plus amount financed?

$100,000 property - Put $20,000 down and finance $80,000

This scenario would calculate cash flow on $100,000 irrespective of any money put down.

Rent $1200 Month

Expenses - $980/ Month (P & I, Taxes, Variable Expenses of Cap Ex, Vacancy, Maintenance, and Management Fees)

$135 Cash Flow

5.4% CoC ROI

I hope this is clear.

Sincerely,

Jeff