If you came to this article in a search, it is part of our Rental Property Investment Analysis. Start there to walk through a detailed analysis of a sample property.

If you’re considering investing in real estate rental property, there is a lot of research to do. You should also be sure that you’re suited to being a landlord, and that you have the time to manage properties. However, all that aside for now, what we want to do here is to examine the way that a property generates cash flow from rental operations.

For our example, we’ll use a fourplex, with all four units being destined for full-time rental. This is a simple cash flow calculation to illustrate the potential of real estate as an investment. Critical to this, as with most investments, is an intelligent and well-researched purchase on the front end. We’ll assume for our example that this buyer did their research and made a good buy on our fourplex. Here are the purchase and rental particulars:

1. Purchase price of the fourplex is $325,000.
2. Buyer places 20% down, or $65,000, financing $260,000.
3. 30 year loan is at 6.5%, with Principle/Interest payment of $ 1643 per month.
4. Taxes and insurance at purchase are $3600/year, for total payment of $1943 per month.