Listen, people over complicate this. Cash Flow Before Taxes is simply all your income minus all your expenses. I mean ALL your expenses. That includes debt service. If you calculate that you make $13,400 in rental income and you have expenses (vacancy, advertising, utilities, taxes, insurance, debt service, property management, repairs, sinking fund, etc) of $15,240 then you have a negative cash flow of $1,840. That’s not good. The prospective rental property may not be one you are too excited about.
In today’s economy Cash Flow Before Taxes is a great determiner of whether you should buy/hold or not.
