This is the number every landlord checks first. Rent came in. Mortgage went out. What is left?
Monthly cashflow is BTCF divided by 12. It is your month-to-month reality. Unlike yields and returns, which are annual planning numbers, cashflow is the daily operating number that keeps your portfolio running.
For a typical Portsmouth BTL, the numbers might look like this. Rent: £1,100. Mortgage (interest-only at 5% on a £160,000 loan): £667. Management at 10%: £110. Maintenance reserve: £110. Insurance: £21. Void allocation: £92. Monthly cashflow: £100.
One hundred pounds a month. That is £1,200 a year. On a £50,000 deposit, that is 2.4% before tax. Not great, but better than negative.
The danger is that a small change can wipe it out. If the mortgage rate goes up 0.5%, cashflow drops to £33. If you have two emergency repairs in one month, the year’s cashflow is gone.
That is why experienced landlords on the South Coast focus on cashflow over yield. A property with modest yield but reliable positive cashflow is worth more than a high-yield property with tight margins.
If a property cannot generate at least £100 a month positive after all costs, it is not a cashflow property. It is a capital growth play. Treat it accordingly.
The formula
Monthly Cashflow = Monthly Rent - Monthly Mortgage - Monthly Operating Costs
Why this matters
Monthly cashflow is the number that keeps you in the game. Positive cashflow across your portfolio gives you options. Negative cashflow traps you.
If you want to know exactly what a property is worth before you make an offer, Xelox Properties can help. We run the numbers so you do not have to.