Cashflow is the most honest metric of an investment property. It shows you what actually remains in your account at the end of the month -- or what is missing. Many investors calculate only roughly: rent minus mortgage interest. The result is almost always too optimistic.

In this article, you will learn which income and expenses truly belong in the calculation, how to compute the cashflow step by step using a concrete Swiss example, and when a negative cashflow is acceptable.

What Is Cashflow in Real Estate?

The cashflow of an investment property describes the actual flow of money: how much comes in (rental income) and how much goes out (all running costs). The difference is your monthly or annual cashflow.

Cashflow = Rental Income - All Running Costs

This sounds simple but is surprisingly complex in practice. The catch lies in the costs: mortgage interest is just the tip of the iceberg. Amortisation, maintenance, management, vacancy, and ancillary costs make up the rest -- and these items are frequently forgotten.

Cashflow is not the same as yield. The yield calculation relates the return to the capital invested. Cashflow, on the other hand, shows you whether you need to top up money each month or whether the property sustains itself.

Why is this so important? Because a property with a good yield can still have a negative cashflow -- for instance, if the amortisation burden is high. And conversely: a positive cashflow says nothing about whether the return on your invested capital is attractive. Only both metrics together provide the complete picture.

Income: What Comes In?

Net Rent

Net rent is your main income. It is the amount the tenant pays for the pure use of the apartment -- excluding ancillary costs. For a multi-family building, you add up the net rents of all units.

Example: A multi-family building with 4 apartments generates the following net rents:

Apartment 1 (3.5 rooms): CHF 1,650/month
Apartment 2 (4.5 rooms): CHF 2,100/month
Apartment 3 (3.5 rooms): CHF 1,600/month
Apartment 4 (2.5 rooms): CHF 1,250/month
Total net rent: CHF 6,600/month = CHF 79,200/year

Rent Indexation

Swiss rental contracts are typically linked to the reference interest rate and the national consumer price index (CPI). This means your rental income can increase over time.

If the reference interest rate rises, you may increase rents according to the statutory formula. If it falls, tenants have the right to request a reduction. Additionally, 40% of inflation (CPI) can be passed on to the rent.

For the cashflow calculation at the time of purchase, always use the current rents -- rent increases are a bonus, not a planning factor. Anyone who calculates with optimistic rent forecasts is flattering the cashflow.

Additional Income

Some properties generate supplementary income: parking spaces, storage units, laundry room, advertising spaces. These items also belong in the calculation.

Expenses: What Goes Out?

This is where it gets serious. You need to know and correctly apply the following items.

1. Mortgage Interest

The largest expense item. In Switzerland, investment properties are typically financed with 75% of the purchase price via a mortgage, split into two tranches:

1st Mortgage (M1): Up to 50% of the lending value. No amortisation required.
2nd Mortgage (M2): 50-75% of the lending value. Must be amortised within 15 years or by retirement.

Example with a purchase price of CHF 1,050,000:

M1: CHF 525,000 at 1.6% = CHF 8,400/year
M2: CHF 262,500 at 1.9% = CHF 4,988/year
Total mortgage interest: CHF 13,388/year = CHF 1,116/month

Whether the financing is even approved by the bank depends on affordability.

2. Amortisation

The 2nd mortgage must be amortised. With linear amortisation over 15 years:

CHF 262,500 / 15 = CHF 17,500/year = CHF 1,458/month

Note: Amortisation is not a "loss." You are building equity. However, the money still flows out -- and that is what matters for cashflow.

3. Maintenance and Upkeep

Every property requires ongoing maintenance: painting, plumbing repairs, garden upkeep, technical servicing. For long-term planning, you should also factor in major renovations.

Rule of thumb: 0.7-1.0% of the building insurance value per year. For a building value of CHF 800,000, that is CHF 5,600-8,000/year.

We calculate with CHF 7,000/year = CHF 583/month.

4. Ancillary Costs (Non-Recoverable)

Many ancillary costs are passed on directly to tenants (heating, water, caretaker). However, some items remain with the owner:

Building insurance (often mandatory in the canton)
Provisions for capital gains tax
Property tax (varies by canton)

Estimated: CHF 3,000/year = CHF 250/month

5. Management Costs

If you engage external management, you typically pay 3-5% of net rental income. Even with self-management, costs arise (advertisements, accounting, legal advice).

5% of CHF 79,200 = CHF 3,960/year = CHF 330/month

6. Vacancy

Between two tenants, an apartment often stands empty for one to three months. In less sought-after locations, vacancy can be permanent. You should factor in at least 2-5% of rental income as a vacancy reserve.

3% of CHF 79,200 = CHF 2,376/year = CHF 198/month

Cashflow Calculation: The Complete Example

Let us summarise our example property:

Property: Multi-family building, 4 apartments, Canton of Aargau Purchase price: CHF 1,050,000 | Equity: CHF 262,500 (25%)

Item	Annual	Monthly
Income
Net rent	CHF 79,200	CHF 6,600
Expenses
Mortgage interest (M1 + M2)	CHF 13,388	CHF 1,116
Amortisation M2	CHF 17,500	CHF 1,458
Maintenance	CHF 7,000	CHF 583
Ancillary costs (non-recoverable)	CHF 3,000	CHF 250
Management	CHF 3,960	CHF 330
Vacancy (3%)	CHF 2,376	CHF 198
Total Expenses	CHF 47,224	CHF 3,935

Cashflow	CHF 31,976	CHF 2,665

The monthly cashflow is CHF 2,665. The property sustains itself and even generates a solid surplus.

Important: Without amortisation, the cashflow would be CHF 4,123 per month. Many listings and sellers calculate cashflow without amortisation -- which paints a rosier picture. Always calculate with amortisation.

Cashflow Per Apartment

For a multi-family building, it is worth looking at the cashflow per apartment. In our example, the average cashflow per unit is CHF 666 per month. Individual apartments may deviate significantly -- for example, because a larger apartment generates higher rental income with proportionally the same fixed costs.

What Happens If Interest Rates Rise?

Suppose the mortgage rate increases at the next renewal from an average of 1.7% to 3.0%. Mortgage interest then rises from CHF 13,388 to CHF 23,625 per year -- an additional burden of CHF 10,237 or CHF 853 per month. The cashflow shrinks from CHF 2,665 to CHF 1,812. The property remains positive, but the buffer is thin. At 4% interest, the cashflow would be only CHF 927 per month.

Running through such scenarios is essential. The affordability of your property shows whether the bank considers the financing sustainable even at higher interest rates.

Positive vs. Negative Cashflow

Positive Cashflow

The property covers all costs and generates a surplus. This is the ideal scenario for most investors. Advantages:

No monthly top-up required
Buffer for unexpected expenses
Ability to build reserves
Scalability: the cashflow from one property finances the next

Negative Cashflow

The property costs you money from your own pocket each month. Sounds bad -- but it does not have to be.

When can a negative cashflow be acceptable?

Appreciation strategy: In prime locations such as Zurich or Geneva, purchase prices are so high that cashflow is negative. In return, the property value appreciates. You trade current income for long-term capital gains.
Amortisation effect: If cashflow is negative only because of amortisation, you are still building wealth -- just not as liquid funds but as equity.
Renovation phase: Temporarily higher costs may arise after the purchase.

When is negative cashflow problematic?

When you cannot sustain the monthly top-up from your earned income in the long term
When the appreciation is pure hope and not based on fundamentals
When affordability is only just met with no buffer

As a rule of thumb: if you need to top up more than CHF 500 per month from your own pocket and there is no foreseeable end (e.g., through the end of the amortisation phase), you should critically re-evaluate the investment.

Tips for Cashflow Optimisation

1. Adjust Rents to Market Levels

Many investment properties are rented below market rates. Check the local rent index and adjust rents at tenant turnover. Note: Swiss tenancy law sets limits here.

2. Minimise Vacancy

Quick re-letting saves real money. Professional listings, good apartment condition, and fair rents help.

3. Optimise the Mortgage

Compare mortgage offers from different banks. Just 0.2 percentage points less interest on a CHF 787,500 mortgage saves around CHF 1,575 per year.

4. Plan Maintenance Proactively

Fix small repairs immediately before they become major issues. Energy-efficient renovations can reduce ancillary costs in the long run and increase property value.

5. Evaluate Management

Is external management worthwhile, or can you (partially) handle it yourself? For a property with 4 apartments, self-management can make sense. Beyond 10 units, it becomes difficult without external help.

6. Leverage Tax Optimisation

Mortgage interest and maintenance costs are tax-deductible. A smart allocation between value-preserving and value-enhancing maintenance can optimise the tax burden. Value-preserving maintenance (e.g., painting, heating repairs) is fully deductible in the year incurred. Value-enhancing maintenance (e.g., a new conservatory) is not -- but it increases the cost base and reduces the future capital gains tax upon sale.

7. Build a Cashflow Reserve

A prudent investor sets aside part of the positive cashflow as a reserve -- for unexpected repairs, prolonged vacancy, or interest rate increases. A good target is 3-6 months' rent as a liquidity reserve. This way, you are not forced into fire sales or expensive bridging loans during difficult periods.

Calculate Cashflow Automatically

You do not want to calculate the cashflow manually? The immometrics calculator does it automatically -- with all cost items relevant in Switzerland.

Calculate the cashflow of your property -> /prognose

Calculating the Cashflow of an Investment Property