Real estate cash flow forecast

Property Cash Flow Forecast – What to expect

Cash flow is one leading advantage from rental property investment and can show the potentials of the investment. Because real estate is held over relatively long period, it is important to have an overview on the revenue and expenditure of the asset over the specified period. Cash flow forecast therefore analyses the potential income and costs to be realized from operating a property. There are key elements that the forecast examines to determine the true potential of the asset.

Potential gross rent and other income

The main revenue from commercial real estate comes from rent receivable for the lease of the space. Depending on the category of the asset, rent may be daily, as in the case of hospitality facilities and apartments, monthly, annually or such period as agreed. In some cases, such as long lease retail tenancies, a lump sum payment is made at the beginning of the occupancy in addition to subsequent periodic premiums. Other income may include charges for the use of common areas and utilities including waste management and security.

Maintenance and repair Costs

Maintenance and repairs are required to keep the property in good market condition and can be a significant cost item. Depending on usage, age and even the maintenance philosophy of the asset, a careful estimation of future planned and corrective maintenance expenditures would be included in the forecast. It is important to clearly define what is covered under maintenance so that upgrades and remodeling are not misrepresented as maintenance costs.

Utilities and others

These are costs associated with common areas and facilities including external lighting, water supply, security, waste management and landscaping. Salary payments, consumables and advertising could also be included where applicable.

Taxes and Insurance

The Income Tax Act, 2015 (Act 896) outlines tax rates applicable to commercial property in Ghana. These are 8% and 15% of gross rent for residential and non-residential properties respectively. In addition to the rent tax, Local government authorities also levy property rates which depends on the value and location of the property. Insurance is another important element of the operating expenses which should also be included in the forecast.

Property management fees

Where a property is operated by a management company, a typical flat rate would be applied on the gross revenue as management fee. This takes care of administrative, supervisory and oversight work to successfully manage the property.

Vacancy allowance

This section of the forecast would account for periods when the property may be vacant for various reasons. For short let apartments, hotels, and hospitality facilities, demand is expected to fall during certain periods of the year resulting in vacancies. Also, the period between the expiry of one tenancy and the beginning of another as well as time required for major maintenance activities or upgrades could also result in vacancies. Different discount rates may be applied to the cash flow.

Rent adjustment  

A point of interest on the cash flow analysis is the rent adjustment that every investor wants to see, as a direct benefit of time and compensation for inflation. But the rate and frequency of increments are guided largely by market conditions. The rate you will see therefore is a conservative estimate considering prevailing and future market performance trends.

The cash flow potential of your investment property thus has many elements as outlined. One key observation; however, is that principal and interest payments are excluded from the expenses because debt servicing is not an operating cost. Whereas two properties may generate same revenue, their financing may differ and hence only considered when estimating return on investment. Cash flow analysis could help property investors examine all factors that affect income and measures to control them.


Real Estate Syndication

Real estate syndication is when a group of investors put their monies together to buy income-producing properties. By coming together, less is required from each investor to acquire a property. It enables numerous persons to take a small share in a project thereby spreading the risk such that the outcome; positive or negative, is distributed among the group. The concept of real estate syndication began with friends who know themselves but today, technology has revolutionized syndication into many forms and many thousand individuals can remotely be involved.

Commercial real estate

7 Major Reasons to Invest In Commercial Real Estate

There are a number of investment vehicles available to investors but real estate stands out with tangible features that make it a superior alternative to Stocks, Bonds, Mutual Funds, Treasury bills, and Fixed Deposits. Property is a high asset class that can form the foundation for stable wealth and these are the top 7 reasons to consider property in your portfolio.

The Need To Include Long Term Assets In Your Portfolio

Depending on your level in life, you may have a future plan or goal. Generally, younger people would have goals of acquiring properties while the old would be fine with a periodic source of income. No matter your goal, you should have a plan. One investment rule you should always keep is Don’t put all your eggs in one basket. You should have not just one investment asset but a couple of assets that balance your risks and rewards. This is called asset allocation. Asset allocation is an investment strategy that seeks to balance risk and rewards by apportioning a portfolio’s assets according to an individual’s risk tolerance and investment horizon. Your portfolio may include short-term assets and long-term assets. Let’s have a quick definition of short-term assets and then delve deeper into long-term assets.


2 Most Popular Investment Alternatives to Stock

Is there a better alternative to investing in the stock market? Reading charts, watching the news on stock prices, or reading journals may be hectic. Besides, what time do you have available to consume all this? The bigger headache is leaving your money in the hands of a broker who explains to you why prices are unstable daily. Yet all you want to know is where your money is going and when your profit is coming in. Have a look at these alternatives.

What has Covid-19 Taught Us About Investing?

Covid-19 has taught us a great deal about investing. Most of us young people (and this chat is with young people) have never witnessed times like this before. We only read about the great depression almost as an event that happened in a distant land. Our understanding of what it practically means for an economy to be in recession has only been shaped by books. This opportunity is therefore valuable in learning how dramatic times and seasons could change investment outcomes. To know there are times when investments do well and there are times when they are threatened. Times and seasons happen to them all according to the Holy Bible!

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The Easiest Way To Get Started in Real Estate Investing

If you are new to real estate investing, you may have heard several reasons why it is the preserve of just a few wealthy individuals and institutional investors, and if you are an old investor, you know that these are true! Real estate is capital intensive and you need hard money to participate. That you need to know a great deal about properties to understand how it works. Indeed real estate can lock up your capital for a long time, you have to be patient enough to recover your investment. Structuring real estate finance can be complex and difficult to understand. Property transactions and laws how many wished they had not got involved!

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Real Estate as an investment

Among the many investment vehicles, real estate stands out with unique features that make it great potential for stable wealth creation. Stocks, bonds, mutual funds, Treasury bills, and fixed deposits are all types of investments with similar characteristics available to investors. However, these key advantages of property investing truly qualify it as a high asset class at the base of wealth creation.


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about us

The team at Varcuum has commissioned itself to bring premium property investment opportunities to you through innovative solutions. Our combined expertise of several years and deep understanding of the local market has been the bedrock on which we have built a solid due diligence system, a tool we deploy to evaluate each investment.
We undertake a lifetime walk with you as wealth partners to make sure each step along the journey is a hitch-less experience delivered with a white glove touch. Work with us!


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