Cash Flow

Cash flow is the movement of money into and out of a property or business over a period. For a rental it is rent collected minus operating expenses and debt service. DSCR measures how many times the property's income covers its debt payments, which is coverage of cash flow.

A DSCR of 1.20 means rent is 20% higher than the full payment, so the property produces positive cash flow of about 20% of the payment each month before vacancy and repairs. A DSCR of 1.0 is break-even. Below 1.0 the owner funds the shortfall.

The residential DSCR uses gross rent, so the cash flow it implies is before management, maintenance and reserves. Actual cash flow after those runs 15 to 30% of rent lower. A property that qualifies at 1.10 can therefore be cash-flow negative in practice, which is why the calculator labels its cash flow figure as before vacancy, repairs and management.

Further reading: Cash Flow on Wikipedia.