Defining Real Cash Flow
True cash flow is what hits your bank account after every expense — including reserves for vacancy, maintenance, capital expenditures, and management. Many novice investors calculate 'cash flow' as rent minus mortgage, which dramatically overstates returns.
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The 1% Rule and Why It Matters Less Today
The classic 1% rule (monthly rent ≥ 1% of purchase price) is rarely achievable in major U.S. metros today. It remains useful as a screening shortcut, but most modern cash-flow investors focus on cash-on-cash return targets of 8–12%.
Building a Reserve Stack
Plan for vacancy at 5–8%, maintenance at 5–10% of rent, capex at 5–10% of rent, and management at 8–10% of rent. Properties that cash-flow only because the owner self-manages and self-repairs are not truly cash-flowing.