Cash Flow
The money left after subtracting operating expenses and mortgage debt service from a property's income.
Cash flow is the income an investment property actually puts in the owner's pocket after paying both operating expenses and the mortgage debt service. Positive cash flow means the property earns more than it costs to operate and finance.
Cash flow differs from net operating income, which subtracts operating expenses but stops before the mortgage payment.
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- Net Operating Income (NOI)
A property's income after operating expenses but before mortgage debt service, used in the income approach to value.
- Leverage
The use of borrowed money to control a larger investment, which can magnify both returns and risk.
- Capitalization Rate (Cap Rate)
The rate of return on an income property, equal to net operating income divided by value.
This definition is Texas real estate exam-prep education, not legal, tax, or professional advice. Verify current rules against the official source before relying on them for a real transaction. Back to the full glossary.