Cash Flow

As we all know, Cash Flow is pretty simple.  Income less expenses equals the amount of cash flow.  If the expenses are more than the income, you have negative cash flow.

Because all expenses MUST be paid with IRA funds, you will want to make sure the property will generate positive cash flow before you purchase it.  Although there are other ways around this, the easiest way is to make sure the property you are considering makes enough income to pay the expenses including the repairs, maintenance and utilities; the real estate taxes; the property insurance; and the debt service.  Plus, you will usually want some income to go back into the IRA.

Investing more cash improves the cash flow, but lowers the financial leverage.  Although there are other considerations in a property purchase, cash flow is an important one.

To help you figure out if a particular property will create positive cash flow, we have created the attached work sheet.