Good Cash Flow on a Rental Property: What You Really Need to Know

If you’ve ever scrolled through property listings and wondered what "good cash flow" on a rental really looks like, you’re not alone. The answer isn’t one-size-fits-all, but there are a few key things seasoned investors always double-check before getting serious about a place.

Cash flow is just what’s left after you pay the bills—rent minus mortgage, taxes, insurance, repairs, and all the other not-so-fun stuff. But calling it “good” depends on your goals, the market, and your risk tolerance. Some folks are happy with a tiny bit left over if the area is set to boom, while others walk away unless the numbers are way better than a regular savings account.

The bottom line: you can’t trust a listing, a gut feeling, or even someone else’s definition of “good.” You need to run your own numbers, dig into the details, and decide what works for you in your market. The rest of this article will walk you through exactly how to do that, with simple, real-life advice you can actually use.

• What Is Cash Flow on a Rental Property?
• How to Calculate and Judge Good Cash Flow
• Factors That Impact Cash Flow in Commercial Properties
• Typical Cash Flow Benchmarks and Pitfalls
• Tips to Boost Your Rental Property Cash Flow

What Is Cash Flow on a Rental Property?

Cash flow is simply the money you pocket each month after all your rental property expenses are paid. It’s what investors care about the most because it’s the difference between a property bleeding money and actually padding your bank account. Sounds basic, right? But a ton of folks still mix it up with things like appreciation or "projected net gains." Cash flow is real, right-now income—not guesses about what your place will be worth in ten years.

Here’s the basic math: take the total rent you collect every month, subtract every single expense tied to the property. What’s left is your cash flow. If the number is negative, you’re actually losing money by owning the place. If it’s positive, you’re making money above what you spend.

A well-known property website, BiggerPockets, describes it like this:

“Cash flow is arguably the most important number in real estate investing. It’s what’s left after all the bills are paid, and determines whether you’re getting paid or going broke.”

You can break down cash flow into a couple of types:

• Gross cash flow: That’s just the total rent minus direct operating expenses, not counting your loan or financing.
• Net cash flow: This takes financing (your loan payment, if any) into account. It’s a more accurate way to see what you’re actually taking home.

To put it in perspective, check out the sample numbers below—these are totally average for a small commercial spot in a medium-sized city in 2025:

So if you’re walking away with $1,400 a month, that’s your real cash flow. Some investors set a target based on a percentage of their total investment—like aiming for 8% or more annually. But honestly, in today’s cash flow obsessed market, getting your numbers right is the only way to keep your property working for you, and not the other way around.

How to Calculate and Judge Good Cash Flow

If you want to know if a rental is going to work for you, start by getting a handle on how to actually figure out cash flow. Some folks just look at the rent minus mortgage, but that’s only half the picture. You need to count every real expense—otherwise, you’re playing yourself.

Here's the dirt-simple cash flow formula:

• Monthly Cash Flow = Gross Rental Income – (Mortgage + Property Taxes + Insurance + Maintenance + Property Management + Vacancy + Utilities)

Seems basic, but let’s break down what each piece means:

• Gross Rental Income: What you collect in rent every month (before any bills).
• Mortgage: The monthly principal and interest payment.
• Property Taxes/Insurance: Don’t forget these—skip them, and you’re in for a nasty surprise.
• Maintenance: Leaky roofs, plumbing, stuff breaks—a safe bet is to set aside 5-10% of rent.
• Property Management: If you hire a pro, this is usually 8-10% of rent. If you manage yourself, still budget some time/money.
• Vacancy: Nobody’s place stays full 100% of the time. Budget for about 1 month empty per year (so 8% of annual rent).
• Utilities: Sometimes tenants pay, sometimes you pay—run the numbers accurately.

You want that cash flow to be positive—otherwise, your property is basically eating your money every month. But what makes for “good” cash flow? That depends on a few things:

• Market Average: In 2024, a lot of investors look for at least $200–$500 per unit per month, or a 6–12% "cash-on-cash" return. This means, if you put down $50,000, you want to pocket at least $3,000–$6,000 per year after all expenses.
• Your Goals: Some chase high cash flow for monthly income. Others aim for growth in hot areas, accepting less cash flow for more appreciation.
• Risk Tolerance: Higher cash flow usually comes with higher risk (older buildings, tough neighborhoods, or markets with less appreciation).

Here’s a quick look at what typical expenses might look like on a $2,500/month rental:

So with $2,500 monthly rent and $2,250 in expenses, that’s $250 in positive cash flow per month. Some folks might say that's decent, especially if local values are trending up.

Whatever your number, always run the math yourself. And don’t forget to stress-test your deal—imagine a few bad surprises, like higher vacancies or repairs, and see if your bottom line can handle it. That’s how you avoid real estate regret down the road.

Factors That Impact Cash Flow in Commercial Properties

If your goal is solid cash flow, you’ve got to watch a bunch of moving pieces. Almost every factor comes down to money in versus money out, but each bit has a big influence—sometimes for better, sometimes for worse.

Here’s what usually moves the needle the most:

• Rental Income: The obvious one. Higher rents mean more cash coming in, but don’t forget that market rates can change fast, especially in busy areas or during rough economic patches.
• Vacancy Rate: Even the best buildings have downtime. The longer a spot sits empty, the more cash flow takes a hit. In 2024, the average vacancy rate for U.S. commercial retail was around 5.4%—so a month or two with no tenant isn’t rare.
• Operating Expenses: Stuff like taxes, insurance, utilities, cleaning, and routine repairs. These are the regular bills that chip away at profits. Underestimating these can crush your returns.
• Financing Costs: Your mortgage interest rate plays a huge role. Higher rates eat into your spread, meaning less left over at the end of the month.
• Location: Areas with strong population and job growth usually offer better rent collection and fewer vacancies. Properties near malls, hospitals, or transit lines tend to keep tenants longer.
• Property Condition: Old or poorly kept places bleed money on maintenance and can scare off good tenants. A recent remodel might save you headaches (and cash) for a few years.

Let’s put some numbers to these factors. Here’s a quick breakdown using real averages for 2024 commercial properties:

Here’s a quick tip: Always check the local market averages, not just national stats, because rent, vacancies, and costs swing a lot from city to city. If you chase returns without running these numbers, you’re basically gambling with your investment.

Typical Cash Flow Benchmarks and Pitfalls

So, what counts as “good” when talking about cash flow on a rental? For most commercial property investors, a monthly net cash flow of $100 to $300 per unit is seen as decent. On bigger deals—like small plazas or mixed-use buildings—owners often shoot for a cash-on-cash return between 8% and 12% each year. These figures aren’t random. They’re based on what experienced folks actually see, not wishful thinking.

Here’s what these numbers might look like for a typical property:

Of course, these are just starting points. Cash flow swings a lot depending on the city, property age, and tenant types. Some coastal markets might show lower returns but have better appreciation, while good Midwest deals often offer higher cash flow but slower long-term value jumps.

Where do people get tripped up? The biggest pitfall is underestimating expenses. It’s easy to forget about things like vacancy periods, repairs, capital expenses, and property management fees. Here are a few gotchas to watch out for:

• Assuming zero vacancy: Even top-notch properties lose tenants sometimes—budget at least 5% vacancy.
• Ignoring big repairs: Roofs wear out, AC units break, and those bills add up. Always set aside money for capital expenses.
• Skipping property management costs: Even if you’re doing DIY now, you might want help later. Factor it in from the start.
• Forgetting variable expenses: Insurance and taxes can jump year to year. Stay updated with the latest bills.

Bottom line: double-check your math, especially when a deal looks too good to be true. Strong cash flow matters, but only if you aren’t blindsided by surprise costs.

Tips to Boost Your Rental Property Cash Flow

If you want better returns from your rental investment, squeezing out more monthly cash isn’t just possible—it’s often easier than folks think. Let’s get straight into some proven tactics that work for most commercial properties.

• Cash flow gets the biggest boost when you raise the rent, but don’t just set a number and hope for the best. Check similar listings in your area. If you’re undercharging, step that rent up a bit. Small bumps—even $50 more per month—add up to hundreds each year.
• Cutting operating costs is just as powerful. Look for high insurance rates, property management fees, or utility bills. For example, switching cleaning services or renegotiating maintenance contracts can knock dollars off your bottom line fast.
• Upgrade wisely. Not every renovation needs to be fancy. Adding parking spaces, updating security, or installing LED lights can attract better tenants and usually pay off within a year or two. Plus, these changes often keep good tenants put—lowering turnover costs.
• If you’ve got extra space, make it pay. Some building owners rent out storage, signage, or even rooftops for cell towers. These side gigs can add steady income with barely any extra effort.
• Screen tenants hard. A single missed rent hurts more than you think, and chasing late payments eats away at profit (and your time). Use thorough background checks—think credit, criminal, and references—before signing any lease.

Sometimes, people forget to review their loans. Refinancing to a lower interest rate can drop your mortgage payment, sometimes by hundreds per month. If you lock in savings for the long haul, that’s pure profit.

Take a look at how these moves can really change your numbers:

Boosting your returns is about picking one or two improvements and sticking with them. Keep an eye on everything from your utility bills to who’s renting from you. Even small changes can make a big difference when you add them all up.