Cash flow, positive and negative

Rates and thresholds change. The current figures are kept in one place: the Singapore property rules reference.

What it is

Cash flow and capital appreciation are two separate measures, and beginners often blur them together. A property can be losing money every single month on a cash flow basis while still rising in value on paper, and the reverse can be true too, positive cash flow with a value that has not moved much. Neither one guarantees the other.

How to work it out

Monthly cash flow = rental income received, minus the mortgage instalment, interest and principal, minus property tax, remembering the higher non owner occupier rate applies once a home is rented out, minus MCST maintenance, minus insurance and average repair costs, minus a reasonable allowance for vacancy months. What is left over, positive or negative, is the real monthly cash flow.

A simple illustration

Rent of $3,200 a month against a mortgage instalment of $2,800, property tax of $180, and maintenance of $300 comes to a negative cash flow of about $80 a month, before repairs or any vacancy allowance are even added in. These are illustrative numbers only, not a quote for any real unit. It is also worth remembering that rental income itself is taxable, so this is before income tax on the net rental profit is applied.

What beginners get wrong

A frequent mistake is modelling cash flow off gross rent alone, without property tax, maintenance, or a vacancy allowance, then being caught off guard when the real number runs negative. Another is treating negative cash flow as automatically a bad decision, some owners accept it deliberately in exchange for potential capital appreciation or the effect of leverage, that is a personal risk decision for each household, not a fixed rule. A third is forgetting rental income must be declared and is taxable.

What to check

Run the full monthly figure including property tax at the correct occupancy rate, use real maintenance figures from an actual MCST statement rather than a guess, build in a realistic vacancy allowance, then check whether the household's own cash buffer can sustain a negative month for a genuine stretch of time, not just one.

Winfred Quek is an Associate Marketing Consultant at Crestbrick Pte Ltd (CEA Licence No. L31010886H). CEA R073319H. This page is general property and investing education only and does not constitute financial, investment, or legal advice. Verify current figures with IRAS, HDB, CPF Board, or MAS before making any decision.