One of the areas that long term investors look for in deals relating to property is that it should have a positive cash flow. This term refers to formula whereby a property is supposed to be returning a positive cash flow if the rent from the property covers the entire amount spent on taxes, insurance as well as the entire mortgage payment to be made on that property. In other words they consider the investment a good deal if the financing is available at favourable rates and the income from the property adequately covers the price that they pay for it as well as incidental expenses.

Some analysts think positive cash flow is not a very scientific way of judging whether a deal is good or not and prefer using other formula such as net operating income. In any case, the positive cash flow calculation is simple and easy and can be illustrated through a very simple example. Let's say that a property that generates $ 1000.00 per month has a tax element of $ 75.00 and insurance payment of $ 50.00 per month. Suppose the best interest rate on a loan taken by mortgaging this property was 7%, then the maximum loan payment the investor can make per month is $ 1000 (rent) - $ 75 (taxes) - $ 50 (insurance) = $ 875.00. Using an appropriate calculator and factoring in the interest rate as well as the period of the loan and maximum loan payment, the maximum loan amount works out to a little over $ 131,000.00.