Calculating property cash flow: a complete example

Write down all assumptions

The example apartment costs €240,000 and is financed with a €192,000 loan. Acquisition costs and other initial capital must be funded separately; they do not disappear because the monthly calculation starts after purchase. Rent excluding service charges is €900. We budget €72 for rent loss, €80 for recurring owner costs and €60 for maintenance funding each month.

These amounts are purely illustrative assumptions, not generally suitable reserve recommendations. Actual requirements depend on the building, tenancy and association documents, among other factors. Recoverable operating costs are assumed to balance the corresponding tenant advances here and are therefore not included again.

Calculate the loan payment correctly

We assume a borrowing rate of 3.8% and initial principal repayment of 2%. Together, that is 5.8% of the original loan per year. For a conventional annuity loan paid monthly, this produces a €928 monthly payment. The contractual payment terms and amortization schedule govern the actual financing.

The initial calculated monthly components are €608 interest and €320 principal repayment. As repayment continues within the fixed instalment, the interest component falls and the principal component rises. Do not apply the initial split unchanged to every later year.

Identify the monthly funding requirement

After all budgeted items, the plan has a shortfall of €240 a month, or €2,880 a year. Other available funds must cover it. A higher expected property value does not pay monthly bills. Principal repayment does not remove the need to fund the shortfall, even though it reduces debt.

Distinguish budget allowances from bank transactions

With rent paid in full and no maintenance payment, the operating account initially shows minus €108: 900 minus 80 minus 928. However, the €132 earmarked for rent loss and maintenance is not available for other plans. Transferring it to a separate account brings the operating account outflow including this funding back to €240. Across all accounts owned by the investor, that transfer is internal.

In an actual vacant month, record the real rent loss rather than adding another flat monthly allowance on top. Likewise, a repair paid from the accumulated buffer must not appear again as a new reserve contribution. Tracking the buffer balance connects the monthly plan with actual available liquidity.

Test deviations and refinancing

Each scenario below changes only one assumption from the base plan. The vacancy scenario removes the full €900 rent excluding service charges and replaces the €72 allowance. Additional operating costs borne by the owner during vacancy are excluded here and need separate assessment. A large individual repair also needs an annual or multi-year plan. After the fixed-rate period ends, calculate the payment using the remaining balance and new contractual terms; simply carrying forward today’s initial interest rate is insufficient.

Your next steps.

We can work through a particular property’s monthly funding needs, including transparent stress scenarios.