Projection of cash flows must be understood by real estate investors. It can only succeed when it gives good returns. There is flowing of funds in rental properties. It means money is coming in or going out. There is a positive cash flow when finances flow in and a negative cash flow when finances flow out. In a negative situation, the investor must pay from his personal income to cover up the deficit. Income-property investment evaluation needs revenue projections.

It will help give information about the property’s ability to pay its bills. APOD and Proforma Income Statement are two reports on which the rental property analysis are relied upon by investors. APOD or (annual property operating data) which is a mini income statement gives investors a chance to have a look about the property’s financial condition firstly. The proforma income statement gives projections of the cash flows even after the first year of ownership.

So, we see that cash flow projections can give you the status and the health of the property.

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