Property cashflow: how to generate passive income

Property cashflow is the difference between what you receive (rent) and what you pay each month (loan repayment, expenses, taxes). If the result is positive, the property is self-financing and generating income. If it is negative, you need to dip into your own savings each month.

It is the most concrete indicator for an investor: it answers the question 'how much does this property earn (or cost) me each month?'. A property with a high yield but negative cashflow is not necessarily a good investment if you cannot afford to cover the monthly shortfall.

To calculate cashflow, you need to list all monthly inflows and outflows. On the income side: rent excluding charges. On the expense side: loan repayment (principal + interest + insurance), property tax (monthly equivalent), landlord insurance (PNO), management fees, estimated vacancy allowance, and tax on rental income.

Some items are often overlooked: non-recoverable co-ownership charges, CFE (for LMNP), accounting fees, or the provision for maintenance work. On Buy&Rent, all these items are included in the automatic cashflow calculation.

Tax is the item that varies most depending on the chosen tax regime. That is why cashflow is always calculated per regime: the same property can have positive cashflow under LMNP real and negative cashflow under micro-foncier.

Three main levers: increase rental income (furnish the property, short-term rental, shared housing), reduce expenses (negotiate the loan rate, extend the loan term, optimise taxation), and buy well (below-market price, high-yield areas).

Extending the loan term is often the most effective lever. Going from 20 to 25 years significantly reduces the monthly repayment and can turn negative cashflow into positive. The increase in the interest rate is marginal and largely offset.

Negative cashflow does not mean the investment is bad. If the property appreciates in value and the loan is being repaid, you are still building wealth - but it is deferred wealth, not immediate income. You need to be aware of this and ensure the monthly savings effort is sustainable.

Ideally, you want cashflow at least at breakeven (zero), meaning the tenant fully covers your loan repayment. Any positive cashflow beyond that is additional income.

Too many investors buy without having precisely calculated the cashflow. The result: surprises at the first tax return or when actual expenses turn out higher than forecast.

With Buy&Rent, you simulate the complete cashflow before even making an offer. You can adjust every parameter (rent, loan term, deposit, expenses) and see the impact in real time. The simulator compares all 4 tax regimes and identifies the one that maximises your cashflow.