What is a cashflow statement? A cashflow statement is an incredible tool you should be using to gauge how well your real estate investing business is performing. On today’s show, you’re going to learn how to create your own cashflow statement and why it’s so important.
We’re going to talk about what kind of information you should expect to see on a cashflow statement, when you should use one, and why it’s helpful for real estate investing. Please join me for episode 798 of Investing in Real Estate!
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A cash flow statement is an incredible tool that investors can use in order to gauge how their business is performing. This statement allows the investor to determine how well they are managing their cash, and how the business’ money is being disbursed.
Let’s say you’re applying for a loan. They’ll often ask for your financials—which typically includes tax returns, bank statements. But they also may want to see a cash flow statement. If you’re a public company, a cash flow statement is required. For a small real estate investor with an LLC, it’s not necessary but it’s a great way to gauge the health and wellness of your business – so you can see exactly what money is coming in and what is going out. At the end of every year, you can see what your strengths and weaknesses are. Maybe you spent too much money on cabinets in a calendar year, but you can assess whether or not your cash flow covered your expenses.
You can DIY a cash flow statement or attain from your accountant. How does your LLC make money? For a real estate investor, rental income! Write down everything that came in that year, and then compare it to your expenses (mortgage payments, repairs, taxes, insurance, property manager). This is an important tool for you to actually understand what’s happening. Maybe you’ll learn about a weak link in your portfolio. It can be easy to focus on what’s coming in, while overlooking what expenses might be adding up. A cashflow statement is a great way for you to judge what expenses are acceptable, and how you can adjust going forward.
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DISCLAIMER: I am not a financial adviser. I only express my opinion based on my experience. Your experience may be different. These videos are for educational and inspirational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. There is no guarantee of gains or losses on investments.
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