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Let’s be honest – most people who jump into real estate investing get this part wrong. They look at a property, fall a little in love with it, run some rough numbers in their head, and convince themselves it’ll “work out.” Then six months later they’re subsidizing a tenant’s rent out of their own pocket every single month. Not great.
So let’s talk about cash flow. Real cash flow. Not the fantasy version. If you’re just getting started and want to understand what a healthy rental market looks like in practice, browsing listings on sites like https://locationmaison-lehavre.com can give you a concrete sense of what rents actually look like in a real French city – before you start running your numbers.
What Is Positive Cash Flow, Really ?
Cash flow is simple in theory : it’s what’s left in your pocket after every single expense has been paid. If your rental brings in €800/month but costs you €850 to own and manage, you’re at negative cash flow of -€50. You’re losing money every month. That’s not an investment – that’s a hobby with a mortgage.
Positive cash flow means the opposite. Every month, after the mortgage, charges, taxes, insurance, management fees, maintenance buffer – there’s money left over. Even €50 or €100/month matters. It compounds. It protects you when a tenant leaves or a boiler breaks.
The Formula You Need to Actually Use
Here’s the calculation, step by step. No magic, no shortcuts.
Step 1 – Gross rental income
Start with the monthly rent you can realistically charge. Not the optimistic number. Check comparable listings in the area, look at actual market rents. For a studio in a mid-sized French city, that might be €450-550/month. In Paris, obviously different universe.
Step 2 – Apply a vacancy rate
Nobody rents 12 months out of 12 every single year. Budget for roughly 1 to 2 months empty per year, depending on the market. That’s a 8-15% reduction on your gross income. Use 10% as a starting point.
So : €500/month × 12 = €6,000/year gross → minus 10% vacancy = €5,400 effective income.
Step 3 – List every single expense
This is where most beginners crash. They forget half the costs. Here’s what you need to include :
– Monthly mortgage payment (principal + interest)
– Property taxes (taxe foncière) – divide by 12
– Condo fees / building charges
– Landlord insurance (PNO)
– Property management fees if you use an agency (typically 7-10% of rent)
– Maintenance and repairs buffer – minimum 5% of annual rent, often more on older buildings
– Accounting fees if you’re under LMNP or SCI structure
– Rent guarantee insurance (GLI) if you take it – roughly 2-3% of rent
Add all that up monthly. Seriously, put it in a spreadsheet. Every line.
Step 4 – The actual calculation
Monthly cash flow = Monthly income − Total monthly expenses
If the number is positive, even slightly, you’re in the right zone. If it’s negative, you need to negotiate harder on the purchase price, find a way to increase the rent (furnished, colocation, short-term), or walk away.
A Concrete Example – Let’s Run the Numbers
Say you’re looking at a T2 apartment in a regional city. Purchase price : €90,000 (including notary fees). You finance 100% over 20 years at 3.8%. Monthly mortgage : roughly €535.
Rent : €580/month. Sounds good at first glance, right ?
Now let’s actually check :
– Effective income after 10% vacancy : €522/month
– Mortgage : €535
– Taxe foncière (monthly): €60
– Charges : €40
– Insurance (PNO): €12
– Maintenance buffer : €25
– Total expenses : €672/month
Cash flow : €522 − €672 = -€150/month
That’s not an investment generating income. That’s a property costing you €1,800/year out of pocket. Might still make sense if you’re banking on strong capital appreciation – but you need to know that going in, not discover it after signing.
The Gross Yield vs. Net Yield Trap
You’ll often see properties advertised with “8% yield !” – and yeah, that sounds exciting. But that’s almost always gross yield, which is calculated as :
(Annual rent / Purchase price) × 100
It tells you almost nothing useful. What you actually want is the net yield, which factors in all those expenses we just listed. A property showing 8% gross can easily drop to 4-5% net once reality kicks in. And at 4% net with financing costs, you’re often barely breaking even.
Don’t get hypnotized by gross numbers. They’re marketing, not analysis.
What Makes a Property Actually Cash-Flow Positive ?
Frankly, in the current French market with interest rates where they’ve been sitting, finding strong positive cash flow on a standard buy-to-let is genuinely hard. It’s not impossible, but it requires some combination of :
– A below-market purchase price (negotiated aggressively, distressed sale, auction)
– Optimized rental strategy – furnished rental (LMNP) or shared housing (colocation) systematically generates higher rent per square meter than standard unfurnished
– Low-charge buildings – avoid copropriétés with elevators, swimming pools, extensive common areas
– Strong local demand – student towns, industrial basins, cities with employment anchors
Some investors deliberately target smaller cities or specific neighborhoods where prices are low relative to achievable rents. The ratio is what matters. A €40,000 studio renting at €380/month has a completely different profile than an €180,000 apartment renting at €850.
Don’t Skip the Stress Test
One thing I find people systematically underestimate : you need to stress-test your calculation. What happens if :
– Interest rates rise and you need to refinance ?
– The rent drops 10% because the local market softens ?
– You have two months of vacancy instead of one ?
– A major repair hits – roof, plumbing, electrical – costing €3,000-5,000?
Run the numbers under those scenarios. If your investment only works under perfect conditions, it’s fragile. The best deals are the ones that stay positive even when things go sideways.
The Decision Framework
Before buying any rental property, ask yourself these three questions :
1. What’s my real monthly cash flow after every expense ?
Not the optimistic version. The honest one.
2. What’s my break-even rent ?
At what monthly rent do I cover all expenses exactly ? How far below current market rent is that ?
3. What’s my exit strategy if the numbers don’t hold ?
Can you sell without a loss ? Can you occupy it yourself ? Can you switch to furnished to boost income ?
If you can answer all three clearly, you’re operating like an investor. If you can’t, you’re operating on hope – and hope isn’t a strategy.
Final Word
Calculating real profitability before buying isn’t complicated. It’s just uncomfortable, because sometimes it tells you to walk away from a property you liked. That’s the job though. The investors who consistently build wealth through real estate are the ones who ran the numbers honestly, killed their emotional attachment to “nice properties,” and only bought what the spreadsheet validated.
Do the math before you sign. Every time, without exception.