Properly calculating cash flow for a potential project is a skill honed over time. There are of course the basics by comparing rent for the area with the mortgage payment and associated costs. Rent minus expenses equals positive cash flow. After all,real estate investing that’s why you’re in it, right? It wouldn’t be very fun the other way around, would it? But as you collect the rent each month and you pocket the difference, what do you do with the funds? It’s your money and you can do anything you want to with it, but where, exactly, does it go?

The first place it should go is to fund, maintain or replenish your maintenance account fund. This is the fund used to keep and maintain the unit including lawn maintenance, a fresh coat of paint or repairs. The hot water heater and washer and dryer will need fixing or replacement one day so you better have the funds to finance it. How much is enough?

Without using the phrase “well, it all depends” (like I just did) but a general rule of thumb is to take out 10 percent each month from the rent payment for newer properties and 15 percent when the units are older. Regarding how much you should have in the fund, do what banks do and set aside six months’ worth of mortgage payments in a separate account reserved for maintenance costs.

Another place to park your profit each month is another investment. If you did your math correctly the first time around and know how real estate investing really works, start building an investment account to be used for a down payment on still another property. Now your tenants aren’t just paying your mortgage and expenses for you, they’re also saving up your down payment for your next, profitable project!