Just imagine as you\re going through your favourite coffee drive-thru this week that a well-dressed gentleman stops and offers you $11,000 for your medium double double. Who would hesitate? We\d take the cash. It\s not so far-fetched. In fact, if you take that coffee budget and apply it to your monthly mortgage payment a mere $30 extra per month -you could save yourself about $11,000 over the life of your mortgage.
Cash flow is the money flowing in and out of operating your rental property. Many investors live by the positive cash flow generated from the rentals. You can use the following very simple formula to calculate cash flow. Even before buying a property, you can estimate the cash flow to determine if the property is a good investment. In another article, we also discuss a modified formula that factors in tax deduction, which gives you a true cash flow because of the tax savings allowed by the IRS.
Cash flow formula:
Having some knowledge of how to calculate finance charges is always a good thing. Most lenders, as you know, will do this for you, but it can helpful to be able to check the math yourself. It is important, however, to understand that what is presented here is a basic procedure for calculating finance charges and your lender may be using a more complicated method. There may also be other issues attached with your loan which may affect the charges.
I saw a cartoon the other day that was pretty funny, but also pretty sad when you think about it. It showed a couple sitting across from a mortgage lender, and the caption read,