If you have purchased a multi-family property for investment purposes, it is crucial that you take the time and make the effort to accurately calculate the costs associated with the ownership of the property in question.  In the end, the ability to enjoy profitability from this type of investment depends on the cash flow that the property is able to generate.  And, the cash flow directly is connected not only to the costs of keeping the property but to the amount of money that is collected each month in rental payments.

Of course, the amount of money that you generate from rental payments is the base upon which you determine your cash flow ... and ultimately the profits that you will be able to generate from your investment.  However, what is crucial is working determine that the rent that you are charging for the units in your multi-family property are appropriately established. 

Towards the goal of ensuring that you have set rent at the right level in regard to your investment property, there are two primary factors that you need to take into consideration.  These are discussed for you to ensure that you properly can calculate cash flow and project your profits.

First, you need to consider the amount of money that you have to pay each month to satisfy your mortgage obligation.  In this regard, you need to take the overall monthly mortgage obligation and divide it proportionally amongst the incoming rental payments.  By doing so, you will be able to determine the percentage basis of each tenant's rental payment that will need to be applied to mortgage payments.

Second, you need to calculate and project what you likely will have to spend on maintenance issues associated with the property.  You also need to include this in the rental calculation as well.

By combining these two factors, you will be in the best position to work to ensure that you have set rent at the correct level to cover the mortgage obligation, maintenance needs with a reasonable amount left over as excess revenue to serve as profit for your important investment.  You need to constantly review this matters to make sure that there have been no significant changes that will effect the profitability of your multi-family real estate investment.

Richard Stephens