How to Calculate Cash Flow for Multifamily Real Estate Investments

7 September 2025

Investing in multifamily real estate can be a fantastic way to generate passive income while building long-term wealth. But before diving in, there's one crucial number you need to understand—cash flow.

Cash flow is the backbone of any real estate investment. It tells you whether your property is making or losing money each month. But how do you calculate it properly to ensure your investment is actually profitable?

Let’s break it down step by step in plain English.

What Is Cash Flow in Multifamily Real Estate?

Cash flow is simply the money left over after you collect rent and pay all your expenses. Think of it as your monthly "paycheck" from the property.

Here's the basic formula:

Cash Flow = Total Rental Income - Total Expenses

If the number is positive, congrats—you’re making money! If it’s negative, you’re losing money and need to reassess the deal.

But there’s more to it than just subtracting expenses from income. To get a clear picture, let’s break down each component.

Step 1: Calculate Your Total Rental Income

Your income will primarily come from tenant rent, but there may be additional revenue streams. Here’s what to consider:

1. Gross Rental Income

This is the total rent collected from all tenants before deductions. If you own a 10-unit property and charge $1,000 per unit, your gross rental income is:

10 x $1,000 = $10,000 per month

2. Other Income Sources

Many multifamily investments have additional income streams, such as:

- Laundry machines (if you have coin-operated washers and dryers)
- Parking fees (reserved parking spots)
- Storage units (extra storage for tenants)
- Pet rent (monthly fee for tenants with pets)
- Late fees (charges for overdue rent payments)

Adding these to your gross rent can significantly boost your overall income.

3. Vacancy Loss

Vacancy is inevitable—there will be months when a unit sits empty. To account for this, you’ll estimate a vacancy rate, which is usually between 5-10% in most markets.

For example, if you expect a 5% vacancy rate on a $10,000 monthly income:

$10,000 x 5% = $500/month in potential vacancy loss

So, your effective income (after accounting for vacancy) would be:

$10,000 - $500 = $9,500

Step 2: Calculate Your Expenses

Now that you've got income figured out, let’s look at everything you’ll be paying for.

1. Mortgage Payment

If you financed the property, this is likely your biggest expense. It includes:
- Principal (the loan amount being repaid)
- Interest (the cost of borrowing money)

Use a mortgage calculator to determine your exact monthly payment.

2. Property Taxes

Every property has annual taxes that must be paid. To get the monthly cost:

Annual Taxes ÷ 12 = Monthly Property Tax Expense

3. Insurance

Insurance protects your property from damage, lawsuits, and other liabilities. This varies based on location, size, and type of property.

Use the same formula as property taxes:

Annual Insurance ÷ 12 = Monthly Insurance Cost

4. Property Management Fees

If you’re hiring a property manager, they typically charge 8-12% of monthly rent.

For example, if they charge 10%, and your rental income is $9,500 (after vacancy loss), your cost would be:

$9,500 x 10% = $950/month in property management fees

5. Maintenance & Repairs

Every property needs maintenance—fixing leaks, repainting walls, replacing carpets, etc. A good rule of thumb is to set aside 5-10% of gross rent for this.

For a $10,000 monthly income, budgeting $500-$1,000 per month for maintenance is reasonable.

6. Utilities (If Paid by Owner)

Some multifamily properties include water, trash, or electricity in rent. If so, factor this into expenses. The amount will vary by property size and location.

7. Capital Expenditures (CapEx)

These are big-ticket repairs—roof replacements, HVAC system upgrades, new appliances, etc. Investors typically allocate 5-10% of gross rent for this as well.

For a $10,000 monthly income, setting aside $500-$1,000 per month for CapEx ensures you're prepared for major expenses.

Step 3: Calculate Your Cash Flow

Now that we have income and expenses, let’s plug everything into the formula:

Example Calculation

Total Income:

- Gross Rent Collected: $10,000
- Other Income: $500
- Vacancy Loss (5%): -$500
- Effective Rental Income: $10,000

Total Expenses:

- Mortgage Payment: $4,000
- Property Taxes: $500
- Insurance: $200
- Property Management (10%): $950
- Maintenance & Repairs (5%): $500
- Utilities: $300
- Capital Expenditures (5%): $500
- Total Expenses: $6,950

Cash Flow Calculation:

$10,000 (Income) - $6,950 (Expenses) = $3,050/month in Cash Flow

So, in this scenario, your property generates a positive cash flow of $3,050 per month. That’s $36,600 per year—not bad at all!

Is This a Good Cash Flow Investment?

Now that you have the numbers, ask yourself:

- Is the cash flow positive? If yes, it’s a profitable deal.
- Does it meet your cash flow goal? Every investor has a different target return.
- Are the expenses accurate? Conservative estimates prevent surprises.

A solid multifamily deal should generate consistent positive cash flow with a cushion for unexpected costs.

Final Thoughts

Understanding cash flow is non-negotiable when investing in multifamily real estate. While it may seem like a lot of math, breaking it down step by step ensures you don’t miss anything.

Remember: Income – Expenses = Cash Flow. If the numbers work in your favor, you’re on the right track to creating long-term wealth through real estate.

Now go crunch some numbers and find your next cash-flowing multifamily deal!