Scottsdale, AZ · Member since 2013 · 11 posts · 2 votes
So I have done a lot of research/reading in evaluating a multi family for buy and hold such as determining cash flow, cap rate, cash on cash return utilizing the 50% rule for expenses and pro forma numbers. I am just wondering do these same principles hold true for single family homes? Should I expect less for expenses like maybe 60/40 since we are dealing with one WH/HVAC/appliances etc. and less of a vacancy rate? Or is their another formula used to evaluate a good vs. bad deal in single family buy and hold scenarios. What kind of cash flow do you look for in your market for a single family home?
Also when making a first deal I know Brandon states he likes to see $100 per unit cash flow with nothing down and $200 if he is putting money into the deal. As a first time investor in a multi family deal would you suggest trying for more or less cash flow and why?
Investor · Nipomo, CA · Member since 2011 · 227 posts · 76 votes
12y
I personally like a minimum 15% return on any money I put into a deal. And of course, the more cash flow the better. Best one I have gotten with putting money into the deal was 83% ROI. I like a minimum of $250/SFR cash flow after all expenses.
Investor · Nipomo, CA · Member since 2011 · 227 posts · 76 votes
12y
I personally like a minimum 15% return on any money I put into a deal. And of course, the more cash flow the better. Best one I have gotten with putting money into the deal was 83% ROI. I like a minimum of $250/SFR cash flow after all expenses.
Rental Property Investor · KY · Member since 2013 · 1k+ posts · 537 votes
12y
Will Samsky , great post. I, too, am very interested in the responses.
I'm working on a SFR deal right now and calculate just under $100/mo cashflow with the 50% rule and just over $100/mo using the Property Analyzer spreadsheet on BP. I think this is slim, but I'm hoping my numbers are a bit too conservative.
Little things like lawn care, for example, I'm wondering about. I know someone who makes tenants mow the lawn and remove snow, per their lease. I always thought I, as landlord, had to do that. Is it different for multi-family than SFRs?
Investor · Clovis, CA · Member since 2012 · 44 posts · 11 votes
12y
SFH are a bit different. All things being equal, SFH will generally cash flow less.
In regards to SFH, you have to set your cash on cash return desired, minimal amount of cash flow you would consider, etc or basically your criteria. You'd have to take into account vacancy which may depend on the market rental strength (8-16% I have used), maintenance which may be influenced by age of the property, prop mgt fees (which should always be included no matter if you are managing it or not), etc. Generally, I aim for a price to rent ratio of 1.5% or higher (bought for 50K, rents for $750 for example). These would be good starting points. Run the numbers and you'll know if it meets your criteria or not.
Scottsdale, AZ · Member since 2013 · 11 posts · 2 votes
12y
@Leng Thao and @Terry Hershberger Thanks for your replies. So it looks like for SFR vs Multi's you look at the same numbers but also consider the 2% Rule. It seems like everyone prefers multi's vs SFR for cash flow but in my area the good multi's (4plex) are in F- neighborhoods that I can't imagine landlording in. This has made me reconsider making my first deal a solid SFR rather than a scary multi. Good to know @Raymond B. that you can include those things in the lease.
Rental Property Investor · Brookline, MA · Member since 2013 · 1k+ posts · 777 votes
12y
@Terry Hershberger on this. It doesn't matter what kind of deal I'm doing, I need to see a minimum ROI of 15%. I generally don't look at anything generating less than $150/door. Time and energy are worth something no matter how high the ROI is.
I had rarely looked at SFH to start. The property taxes in New England are so high that it generally requires at least one unit to cover that part of the cost. I didn't seriously consider SFH until I began looking at places in Orlando, FL about a year ago.