Property cash flow (cash flow z nemovitosti)
The difference between actual rental income and all of the owner's expenses for a month or a year, including the full mortgage payment (interest and principal), operating costs and income tax. It shows whether the investment brings in money or whether the owner has to top it up from their own pocket. Positive cash flow does not automatically mean a good investment, nor negative cash flow a bad one.
Example
A flat for CZK 4,500,000 with a CZK 3,150,000 mortgage (LTV 70 %, 5.00 %, 25 years) has a payment of CZK 18,415. Rent is CZK 18,000 and the owner's costs CZK 4,500 a month. Cash flow is −CZK 4,915 a month. But roughly CZK 5,300 of the payment goes to principal, so the owner's equity in the flat grows.
In practice
Banks assessing an investment mortgage count only part of the rent and check that your salary can cover negative cash flow. A longer term improves monthly cash flow but increases total interest. Keep a reserve of at least several payments in case a tenant leaves. And work from the full payment, principal included, not from interest alone.
How it differs
Financing is where it parts company with net yield, which ignores it; cash flow includes the whole payment. Accounting profit (for income tax) counts depreciation and only the interest, not the principal, so profit can be zero while cash flow is negative, or vice versa.
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