What's the minimum monthly cash flow you look for

Buying & Selling Real Estate
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What's the minimum monthly cash flow you look for

Erica W.
Investor · Camarillo, CA · Member since 2015 · 32 posts · 1 vote
When evaluating a property? I know that's not the only criteria. Thanks!
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y

@JD Martin  do you also self manage so you have no placement fee or on going monthly PM fee?

Erica,  what I see bandied about is 200.00 a month per door after all expense's.. with 20 to 30% cash down.. bringing a C on C return in the 10% range  but I think in this scenario  6 to 12% cash on cash works.. if your doing it yourself like JD is probably doing ( I don't know for a fact) you will do much better especially in markets were homes only rent for 700.00.... not going to be that easy in our west coast markets were homes don't come close to renting for 700.00 and purchase prices are quite a bit higher.

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  • JD MartinBusiness Member
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    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    9y

    Generally I expect all of my properties to have expenses of 50% or less of the monthly rent. For example, if I rent a place for $700, I wouldn't want to have monthly expenses of more than $350, and that's all in (mortgage, if there is one, taxes/insurance, vacancy, maint, capex, etc). But I generally buy cash and rehab the units fully before they become occupied, so I am buying some rough stuff and most of it has new mechanicals (HVAC, breaker panel, WH, etc), roof, kitchen, bath & flooring, so I usually have very little capital expenses for a very long time. Obviously, those in the stable that are all cash have much fewer expenses, but even the ones that I cash out generate at least half of the rent in cash flow. 

    This number may or may not work for you depending on a whole bunch of factors: quality of initial housing, what level of rehab you do, area of the country, quality of tenants, etc. If you buy a house from 1900 or skimp on the rehab, you should expect to have much heavier maintenance & capital expenses, just for one example. 

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @JD Martin  do you also self manage so you have no placement fee or on going monthly PM fee?

    Erica,  what I see bandied about is 200.00 a month per door after all expense's.. with 20 to 30% cash down.. bringing a C on C return in the 10% range  but I think in this scenario  6 to 12% cash on cash works.. if your doing it yourself like JD is probably doing ( I don't know for a fact) you will do much better especially in markets were homes only rent for 700.00.... not going to be that easy in our west coast markets were homes don't come close to renting for 700.00 and purchase prices are quite a bit higher.

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  • Erica W.
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    Investor · Camarillo, CA · Member since 2015 · 32 posts · 1 vote
    9y
    Thank you! Unfortunately I will be out of state so I will be looking at a property management company to the tune of 12%.
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  • JD MartinBusiness Member
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    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    9y
    Originally posted by @Jay Hinrichs:

    @JD Martin  do you also self manage so you have no placement fee or on going monthly PM fee?

    Erica,  what I see bandied about is 200.00 a month per door after all expense's.. with 20 to 30% cash down.. bringing a C on C return in the 10% range  but I think in this scenario  6 to 12% cash on cash works.. if your doing it yourself like JD is probably doing ( I don't know for a fact) you will do much better especially in markets were homes only rent for 700.00.... not going to be that easy in our west coast markets were homes don't come close to renting for 700.00 and purchase prices are quite a bit higher.

    My sole proprietorship company manages all of my rentals, so yes, in essence I self-manage. I was only using the $700 as an example, as it is our baseline entry-level SFH, and we have other units that rent for higher amounts. But yes, what we do here might not work in other markets. We have a very specific niche that we aim for, which limits the range of homes that we are going to buy but also makes us "experts" in our local market within that niche, such that it is difficult for anyone to steal market share from us (i.e., we always have far more prospects than available units).

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