What defines the net spendable income from an investment in real estate?

Net spendable income from an investment in real estate is best defined by cash flow. Cash flow refers to the actual amount of money generated from an investment after all expenses have been deducted. This includes operating costs, maintenance, property management fees, and other outflows related to the property's management. What remains after these costs are subtracted from the gross income is the cash flow, which is the income that the investor can use freely, thus termed 'net spendable income.'

Other terms related to financial performance, like return on investment, net profit, and capital gain, have specific meanings and may not accurately reflect the immediate liquidity available for use. For example, return on investment is a ratio that measures the efficiency of an investment, while net profit typically considers broader financial metrics without focusing solely on cash flow. Capital gain refers to the increase in value of the investment itself over time, but does not equate to net spendable income in the immediate sense. Thus, cash flow is the accurate term that encapsulates the net income available for the investor’s use after essential expenses.