Cash flow is what is left of the rent once the loan and running costs are paid, shown as a dollar figure over a week, month or year. It is different from rental yield, which measures a year's rent against the purchase price rather than what actually lands in your account. This guide walks through the formula, a worked example and the assumptions worth testing before you rely on the number.
What cash flow means, and how it differs from yield
Rental yield measures a property's rental income against its price, as a percentage. It is useful for comparing properties on the same basis, but it does not touch what you actually pay or receive each week.
Cash flow measures something narrower: money in (rent) minus money out (loan costs and running costs), in dollars rather than a percentage. Two properties with the same yield can have very different cash flow, because one buyer might have a smaller deposit, an interest-only loan or higher strata fees than the other. Yield is a property-level figure; cash flow depends on your particular loan and your particular costs on that property. If you have not worked through yield yet, see how to calculate rental yield.
The formula
Cash flow = rental income − loan costs − property costs
- Rental income is the rent you expect to receive, adjusted for any weeks the property is likely to sit vacant between tenants.
- Loan costs are the interest, and the principal too if you are paying the loan down, over the same period.
- Property costs are everything else it takes to hold the property: management fees, council and water rates, insurance, strata or community title fees, land tax where it applies, and an allowance for repairs and maintenance.
Work it out for a week, a month or a year, whichever period suits you, and keep the period consistent across every property you compare.
Worked example: a $650,000 unit
This continues the example from the rental yield guide: a $650,000 unit renting for $600 a week, with $10,900 a year in running costs including $3,200 in strata fees.
Rental income: $600 a week for 50 weeks, allowing a couple of weeks vacant between tenants, is $30,000 a year.
Loan costs: for example, an 80% loan on $650,000 is $520,000, at an illustrative interest rate of 6.5% a year. This rate is an example for the arithmetic, not a market rate: use the rate your own lender quotes.
- Interest-only: $520,000 × 6.5% = $33,800 a year in interest, with the full $520,000 still owing at the end of the year.
- Principal and interest over 30 years: about $39,440 a year, which pays down part of the loan as well as covering the interest.
| Interest-only | Principal and interest | |
|---|---|---|
| Rental income | $30,000 | $30,000 |
| Loan costs | $33,800 | about $39,440 |
| Running costs | $10,900 | $10,900 |
| Cash flow, per year | about −$14,700 | about −$20,340 |
| Cash flow, per week | about −$283 | about −$391 |
Both results are modelled figures under these assumptions, not a claim about this property or about property in general. Change the rent, the rate, the loan type or the vacancy and the result moves, which is what the next two sections cover.
Reading the result: positive, neutral and negative
A positive cash flow means the rent covers the loan and running costs with money left over. A negative cash flow means you are putting money in each week to cover the shortfall. A result close to zero is sometimes called neutral.
None of these is inherently better than the others: it depends on what you are trying to achieve, what the rest of your finances can sustain, and how you weigh a weekly cost against everything else the property might offer you. A negative cash flow funded comfortably from other income is a different proposition to one that stretches a weekly budget.
This is a before-tax figure. It does not include depreciation, negative gearing or your own tax position, all of which can change what a property actually costs you after tax. Tax rules can change, so check your position with the Australian Taxation Office or a registered tax agent before relying on this number for a decision.
Costs that catch people out
A cash flow figure is only as good as the running-cost list behind it, and Moneysmart's guide to buying an investment property covers many of these from the buyer's side too. Items that often get left out or underestimated:
- Vacancy between tenants: even a well-managed property is rarely tenanted every single week of the year.
- Repairs and maintenance: from a one-off repair to routine wear and tear, an empty allowance here is one of the most common gaps.
- Insurance: landlord and building cover priced for the property and how it is used, not a generic figure carried over from somewhere else.
- Strata or community title special levies: a one-off charge on top of the regular fee, raised for a specific project such as a major repair. A house in a strata or community title scheme can carry this too, not only a unit.
- Land tax: whether it applies, and from what value, differs by state and territory, and it can depend on what else you own. Check the revenue office where you are buying for how it is worked out.
- Rate and fee changes: council rates, water rates and insurance premiums are not fixed for the life of the loan and are worth revisiting each year, not just at settlement.
Testing your assumptions
None of the inputs in a cash flow model are fixed for the life of the property. Testing sensitivity means changing one assumption at a time and watching what happens to the weekly figure, so you can see which inputs move it most for this particular property.
- Interest rate: rerun the loan cost at a rate above and below what you expect, to see how much the weekly figure moves.
- Rent: rerun it at a slightly lower rent than advertised, in case the property takes longer to lease or achieves less than expected.
- Vacancy: rerun it with a longer gap between tenants than the couple of weeks used above.
Change one variable at a time. Change two together and you will not be able to tell which one moved the result.
Doing this in Virtual Buyers Agent
The public Cash Flow calculator runs this formula for a property you are looking at, with no sign-in required. For a property you are already tracking, Finances in the Property Hub records your price, rent, running costs and assumptions, and works out the yield and cash flow from them with the formula shown, so you are not doing the arithmetic by hand each time. In Scenarios, the Rates and rent job lets you change the interest rate, rent and vacancy on a property you have recorded, so you can see how the weekly figure changes without re-entering everything from scratch.
Reviewed 28 September 2026.