1. Are you using all income you pay tax on (minus depreciation)? That would include not only what you put in your pocket but also mortgage pay-down (principle).
2. Are you factoring in soft expenses such as vacancy and cap ex which do not happen on a consistent basis but for which you may be budgeting.
For me, cash-flow in my pocket NOT including mortgage pay-down and AFTER budgeting (setting aside money) for soft expenses is ~21% of incoming rent.
So, that number would be even larger if I added those things back in but this is what I can put in my pocket while still keeping everything running as it should be.
What are you trying to measure though? This isn't telling you how good your investment is. For that I would maybe look at CoC (Cash-On-Cash) return by comparing it to the amount you invested.
1. Yes, so I'm using standard cash flow from operations GAAP, which would be as you said adding in depreciation to net income.
I need to learn how mortgage pay-down principle applies to cash flow since mortgages are not considered operational expenses.
2. I have not factored those in. I took the rents I received at year-end and divided the cash flow from operations by that.
The reason I looked at cash flow from operations divided by rental income is that it should show efficiency in getting cash flow compared to your rental income. For example, if rental income stayed the same for 5 years (just hypothetical) at $100,000, and your cash flow from operations went from $10,000 to $30,000, then technically you are becoming more efficient at receiving cash from your overall rental income.
I see your point, cash-on-cash would give me what I'm looking for. I was thinking at a portfolio level. So for portfolio level, could you do: (total cash flow returned / total cost basis of properties)?