Cashflow: BP most MISUNDERSTOOD term

[Kai Van Leuven]

I read too many posts from investors about "cashflow per door" or "that house does not have a positive cashflow", ect. I feel like the prevailing thought is that it is about "cashflow", singular, when real estate investing is about a series of "cashflows", both positive and negative. I will point to a property I purchased;

Purchase Price: 185,000

Downpayment: 46,250 (Negative)

Monthly Cashflow: 200/month for 5 years (Positive)

Refinance: 75,000 (Positive)

Refinance: 115,000 (Positive)

Monthly Cashflow: -75/month for last year (Negative)

I would say the property is cash flowing great! Over the years I have been able to pull out around $150K to buy other properties, along with some MONTHLY cashflow. 

Why focus solely on monthly cashflow? If you do not have appreciation, all the depreciation of the property will eat up the gains when you sell. I would rather invest in something that has a huge payout in 30 years, or 9 for this case study. That is the final cashflow for any asset, when you sell! 

[Larry Turowski]

@Kai Van Leuven Cash flow is a very well defined term. Let’s not muddy up the misunderstandings further by trying to redefine it. 

Cash flow is the the net income (or loss) after all expenses and mortgage (principal and interest) payments.

That is hardly the whole whole picture in investing but it does mean something.  Your definition does nothing to clear that matter up. You even use it yourself in the way you day it shouldn’t be used. 

It sounds like you want to talk about infernal rate of return (IRR). That does give a fuller picture of investing and cash flow is a component of it. But it is a fairly advanced concept and difficult to formally mathematically define. Most people don't need to define it formally and like you can see the benefit of it in a more free handed way.