Cash-flowing, or performing, residential real estate is a property that generates consistent, positive net cash-flow month after month. Typically there is a Lease between a Landlord (property owner) and a Tenant (renter) for a specific period of time, (Term) usually one year. The term is the period of time the Tenant is obligated to pay rent and the Landlord is obligated to retain Tenant if Lease covenants are kept by the Tenant.
(However, if it is a commercial property/tenant (not legally intended to be used as a residence by the tenant) the Lease is frequently for a longer Term.)
Positive cash-flow is what remains from the total rent and other income (laundry, storage etc) received by the Landlord after ALL expenses have been paid. This is the “Shangrila” of Landlording; all expenses have been paid, and there is money left at the end of the month. This positive cash-flow can then be utilized to pay down the mortgage debt, saved up to buy another property, or used to fund a retirement. (Typically a CPA can help with this decision.)
In short, “cash flowing” residential real estate is leased to tenants and the rent more than covers all expenses so there is a “profit”. Landlords should regularly consult with a reliable and honest Lender to see if they can save money on the largest expense; the mortgage. John Dolbec at First Home Mortgage 401-266-4413 is highly recommended.
The opposite of positive cash-flow is negative cash-flow; when there is not enough money to cover ALL expenses. If this is the result of a tenant who is not paying rent you should immediately consult with an eviction attorney and get a better tenant. Tenant-selection is one of the fundamentals that should not be over-looked. If you have to hire a mover to entice a tenant to move out sooner do it. Call Gentry Moving and Storage 401-785-1600 for a stress-free experience.
Please note: this is not legal or tax advice and an attorney or tax professional should be consulted for legal and tax questions. We recommend Resnick and Caffrey Law Firm.