Cash Flow vs Income
Investors and business operators care deeply about CF because it’s the lifeblood of a company. You may be wondering, “How is CF different from what’s reported on a company’s income statement ?” Income and profit are based on accrual accounting principles, which smooths-out expenditures and matches revenues to the timing of when products/services are delivered. Due to revenue recognition policies and the matching principle, a company’s net income, or net earnings, can actually be materially different from its Cash Flow.
Companies pay close attention to their CF and seek to manage it as carefully as possible. Professionals working in finance, accounting, and financial planning & analysis (FP&A) functions at a company spend significant time evaluating the flow of funds in the business and identifying potential problems.Cash Flow - Definition, Examples, Types of Cash Flows (corporatefinanceinstitute.com)
The Difference Between Cash Flow and Profit (thebalancesmb.com)
Referenced from The “requirement” to buy property - Taiwan / Living in Taiwan - Forumosa
The capitalization rate , often just called the cap rate , is the ratio of Net Operating Income (NOI) to property asset value. So, for example, if a property recently sold for $1,000,000 and had an NOI of $100,000, then the cap rate would be $100,000/$1,000,000, or 10%.What You Should Know About The Cap Rate (propertymetrics.com)
That’s because you put half of the money down. The fact your mortgage is still 1.5x times what the rent would be even with a 50% down payment shows just how out-of-whack the market is.
I live in a newer place that I’m told was purchased for around $33 million. I pay $60,000/month. I’m sure that with a standard down payment, the mortgage would be at least double my rent.
The cap rates property owners here accept is crazy. My real estate friends in the US laugh when I tell them what people pay a…
Right, its not very good. But, its not negative
Either way, you can’t compare the mortgage payment to rent - you need to compare the interest rate.
With all due respect, you’re clearly not experienced in real estate investment. The whole idea that “as long as you make more than the interest you’re paying you have a good thing going” is the kind of nonsense that leads people to believe that interest-only loans are the path to real estate riches.
I don’t really care if the owner of my property paid for it in cash and doesn’t have a mortgage. The bottom line is that I’m renting out a place that could cost well over a million USD to buy for ju…
Investing in real estate purely for the rental income is simply stupid. Not only are there better returns to be had elsewhere, you have to deal with a bunch crap in finding tenants, dealing with their complaints, etc
You do it for the potential capital appreciation, which when combined with leverage can be quite attractive… IF you expect property prices to increase
Uhm cashflow is an important consideration when looking at an investment, which is why one of the ways you can evaluate a property is to look at what it would cost to rent versus buy under a typical purchase scenario (30 year mortgage, 20% down). This is an easy way to broadly assess whether you’re in a buyer’s versus renter’s market.
But the cap rates are the true tell.