How do I work out cash flow on an investment property?

Cash flow is all the money your property brings in, minus all the money it costs you to hold it, over the same period. Add up rent received, subtract every cost including your full loan repayments, and the result tells you whether the property pays you each month or needs topping up.

The formula

Cash flow = rent received − (loan repayments + holding costs)

Work it out annually, then divide by 52 or 12 to see the weekly or monthly figure. Annual is more accurate, because many costs, like insurance and council rates, arrive once or a few times a year.

Money in

• Rent actually received, not the advertised rent. Allow for weeks the property sits empty between tenants.
• Any other rental income, such as fees a tenant reimburses you for.

Money out

• Loan repayments: the interest, plus any principal if you are on principal and interest
• Property management and letting fees
• Council rates, water service charges and land tax
• Landlord and building insurance
• Strata or body corporate levies
• Repairs, maintenance, and pest or smoke alarm services

Cash flow is not the same as your tax result

Some items affect your bank account but not your tax, and some do the opposite.

• Principal repayments leave your account, so they count in cash flow. But you cannot claim a deduction for payments that reduce the principal of the loan.
• Depreciation and capital works reduce your taxable income but cost you nothing in cash that year. The ATO treats these, along with borrowing expenses, as deductions claimed over several income years.
• Mixed-purpose loans: if part of a loan was used for something private, you can only claim interest on the portion used to produce rental income.

That is why a property can be negatively geared for tax and still have a very different cash position. The ATO describes a property as negatively geared when it is bought with borrowed funds and the net rental income, after other expenses, is less than the interest on the borrowings.

2026 change: From 1 July 2027, net rental losses on established residential properties bought after 7:30pm AEST on 12 May 2026 can only be offset against residential rental income or rental property capital gains, not your salary. Properties held or contracted before then keep the current rules until sold, and eligible new builds are exempt. This makes knowing each property's real cash flow more important, not less.

Worked example (illustrative figures only)

For tax, the $6,000 of principal comes out and, say, $4,000 of depreciation goes in. The net rental loss would be about $9,300. The cash gap and the tax figure are different numbers, and you need to know both.

Costs investors often miss

• Vacancy and letting fees when a tenant leaves
• Insurance and rate increases at renewal
• Special levies from a strata or owners corporation
• Interest rate changes, especially when a fixed rate ends
• A buffer for one-off repairs, like a hot water system or roof

Tracking cash flow across several properties

One property is manageable on paper. Across three or four, with different loans, managers and renewal dates, the picture gets lost quickly. Opulo shows the cash flow for each property and for your whole portfolio in one dashboard, so you can see which properties pay their way and which need topping up.

Sources

• ATO: Interest expenses
• ATO: Get your rental right this tax time
• ATO: Negative gearing
• Baker McKenzie: Budget Bites, CGT discount and negative gearing