Investing in Multi-Family to Generate $10K-12K per Month in Cash Flow

[Vasundhara Ranjani]

As the title says, I would like to purchase a few (or a couple of larger) multifamily properties to cash-flow at least $10K per month (ideally $12K/mo.).

The criteria are mainly:

-B-class properties/locations (i.e. no "ghetto" properties)

-Professionally managed by a reputable/trustworthy company (not fly-by-night operations)

-Looking mainly in Texas DFW, San Antonio, Austin, Houston) & Wisconsin (Milwaukee and surrounding areas)

What kind of investment would this require? I know it varies by location etc. but ballpark? What $ amount do I need to invest to be able to generate at least $10k per month in cash-flow?

[Jason Wray]

In order to reach a higher cash flow your going to need to purchase one or more 2-4 unit multifamily rentals or a property in a high traffic amenity area for STR - VRBO/AIRBNB. If you can purchase a 2-4 unit in an amenity area that an overall plus. Overall STR's tend to maximize rents again as long as location is in a hot zone.

The other options is to find a more or a luxury style property that you can again use as an STR as long as it is approved with the HOA or area in general. I would open your search to a few other states like Oregon Coast, (Great coastal STR properties that cash flow heavy) - Florida (either coast), TN, Mountains, and Nashville.

[AJ Wong]

Quote from @Jason Wray:

In order to reach a higher cash flow your going to need to purchase one or more 2-4 unit multifamily rentals or a property in a high traffic amenity area for STR - VRBO/AIRBNB. If you can purchase a 2-4 unit in an amenity area that an overall plus. Overall STR's tend to maximize rents again as long as location is in a hot zone.

The other options is to find a more or a luxury style property that you can again use as an STR as long as it is approved with the HOA or area in general. I would open your search to a few other states like Oregon Coast, (Great coastal STR properties that cash flow heavy) - Florida (either coast), TN, Mountains, and Nashville.

There's an OR Coastal TriPlex that should generate $25K per unit annual gross as an STR..target price of $150k-165k per unit with a concession. A University area 10 plex and a coastal luxury Triplex that if converted to full time STR would gross $20k+ monthly. Otherwise a couple luxury STR's like the oceanfront
@Jason Wray did the financing for are reliable producers. Boutique hotels in Bandon and Florence I have my eyes on. 80 Unit complex a bit further north waiting to be converted..

[Marcus Auerbach]

Quote from @Vasundhara Ranjani:

As the title says, I would like to purchase a few (or a couple of larger) multifamily properties to cash-flow at least $10K per month (ideally $12K/mo.).

The criteria are mainly:

-B-class properties/locations (i.e. no "ghetto" properties)

-Professionally managed by a reputable/trustworthy company (not fly-by-night operations)

-Looking mainly in Texas DFW, San Antonio, Austin, Houston) & Wisconsin (Milwaukee and surrounding areas)

What kind of investment would this require? I know it varies by location etc. but ballpark? What $ amount do I need to invest to be able to generate at least $10k per month in cash-flow?

Your objectives are mutually exclusive. You have two ways to get to 10k cash flow. 

One way is to go buy in a rougher neighborhood, buy a property that is not fully rented, needs work etc and get it repositioned. You'll need about 30-50 units, $2-4M in assets leveraged at 70%, so 600k to 1.2m down. It will take some time and effort to get that done.

Or: if you want to be in a B class asset thats already stabilized you'll have to pay a premium, which means you are either not going to cash flow for the next couple years until rents have moved on or you'll have to bring 50% down on a nice 5M asset.

Of course, why the heck would anyone invest that much cash for 10k in cash flow? It does not make sense, there are easier ways. The reason goes back to RE investing 101 - you make money on equity, deleveraging, apreciation and tax shelter - cash flow is actually the smallest, while still absolutly vital to keep your biz alive. 

Milwaukee is probably one of the better areas to do this, but while priced low, we have been in the top 10 most competitive markets in the US in 2023 to buy and from a renters perspective MKE is ranked #3 per rentcafe's 2023 report - both based on a chronic housing shortage. More on my YouTube channel. 

[Chris Seveney]

Quote from @Vasundhara Ranjani:

As the title says, I would like to purchase a few (or a couple of larger) multifamily properties to cash-flow at least $10K per month (ideally $12K/mo.).

The criteria are mainly:

-B-class properties/locations (i.e. no "ghetto" properties)

-Professionally managed by a reputable/trustworthy company (not fly-by-night operations)

-Looking mainly in Texas DFW, San Antonio, Austin, Houston) & Wisconsin (Milwaukee and surrounding areas)

What kind of investment would this require? I know it varies by location etc. but ballpark? What $ amount do I need to invest to be able to generate at least $10k per month in cash-flow?

 you would need to invest around $1M - $1.5M + depending on the location to get that cash flow. 

[Sherry Patterson]

Hi @Vasundhara Ranjani With my experience as an investor, broker and property manager I can tell you it depends on the asset. If it is cash flow you are after then I probably not look at multifamily unless it is a large asset. Anytime you have tenants and toilets you will have expenses that will wipe out the cashflow. As far as the STR that were mentioned, we have lake houses and beach condo's and I can tell you they are not going to cash flow that much. They are seasonal and their price tag is so high, along with HOA fees, they are not going to give you the cash flow you are wanting. You have to buy right. If you over pay in the beginning it is hard to ever recover from that. If interested in STR the best place is around an industrial or hospital area. This does not seem near as glamorous as having a beach house, but it is not seasonal. It needs to be in an area with business travel so it stays booked. I also have tiny homes and these make a lot more money because I only paid around $25k so very easy to make a profit and people think it is so cool to stay or live in a tiny home right now.
What I suggest to look at for higher ROI is MH parks. Again, not glamorous but if purchased right will give a much higher ROI than multifamily. Other assets for higher ROI are self-storage, RV parks, & industrial parks. If you buy a B multifamily in C condition there can definitely be added value and you could get to $12k a month. But I would plan to profit at most $300 per door so you would be looking to purchase 40+ units which these days you would be looking at around $6M. I don't know your budget but I would be more than happy to have a call with you to talk about your goals and provide more ideas on how to get there. Happy Investing!

[Evan Hopple]

@Vasundhara Ranjani  Check out the OH market

[Paul Gomez]

To get $10000 per month in cash flow, I’ll make some assumptions

Multiply $10k by 1.25 DSCR to get your monthly net income

= $12,500

Multiply times 12 to get annual net cash flow = $150k NOI

For information’s sake, assume 50% expense ratio, so multiply $150k x 2 to get an EGI of $300k

Assume a Class B in those Texas metros, assume a 5.5% cap, so divide you NOI/Cap Rate to get a value of $2.7M

Assume $100k per unit, so you’re looking at around a 27-30 unit property. Don’t forget about 5% cost to close in addition to the purchase price.

Assume leverage of about 65% on a $2.9M purchase price, you’d need to invest around $1M just to get that cash flow.

There's too many levers out there to get to that number. You need to know the NOI, expenses, how much you can increase income, your leverage and the rate. The commercial side of multifamily can be very convoluted.

[Evan Polaski]

Things you need to factor: how much work are you willing to do and how much risk are you willing to take.  Risk is the likelihood of your cashflow varying month to month.  Take on more risk you can by fewer doors, or invest less money to get your return, but you typically are taking capex risk, market risk, and tenant risk to get there.  Maybe those bets pay off, maybe you get burned and now have to make up for those losses to get back to even and then keep going to get ahead.

If you are planning on investing for the long term, just remember, that the average single family needs north of $400/mo reserved to replace the roof every 25 yrs, repaint the exterior every 15 or so years, HVAC every 10-15 years, flooring, interior paint, kitchen remodels to keep rents high, bathroom remodels, new decks, fences, retaining walls, garage door openers,...  The list goes on and on.  And anything you choose not to take care of proactively will come back if you ever want to sell.

[Joshua Christensen]

The question is very broad in terms and you see the answers vary wildly due to not having enough information to go on.

1. Are you going to be involved in management of the assets or do you want a turn key     passive solution? Based on your requirement of management of the operations, I'm assuming you want a Truly passive investment.

2. Does the cash flow need to be $10k realized monthly or 10k averaged out monthly?

3. Are you paying cash for assets, using leverage as a single owner, or wanting to enter syndications with a 'crowd funding' component?

4. Cash on a single owner property could be an 1,000,000 - 2MM property in my area.  The units may vary some.  Essentially, it will need to Gross $16-20k per month to Net $10k

5. A syndication earning 7-8% pref will take 1.5-1.6 MM for monthly cash flow. This will be truly passive in which case you need to trust the operators.

[Jordan Moorhead]

$1.5 million in investable capital is what this will require @Vasundhara Ranjani. You have to start somewhere and unless you have the capital you'll need to take your time to reach this goal.

[Brock Mogensen]

A good ballpark metric is you achieve an average of 10% Cash on Cash return. Therefore investing $1,200,000 would get you to $10k/month. That being said, there are plenty of creative strategies you can implement you get there quicker/with less cash.

[Vasundhara Ranjani]

Thanks for all the answers guys.

To break it down a bit further:

1.) I have ~ $1m to invest

2.) Looking at multi-family property (not STR) with professional management (i.e. I will be mostly hands off)

3.) Will be using leverage so that would mean $1m down would enable me to get a ~ $4m property(?).

4.) What areas of Texas and Wisconsin would this most likely work?

[Peter Falk]

I'm in Madison, WI with pretty high property taxes (around 2% of the value/purchase price) and also think the quick ballpark 45-50% expense ratio is pretty close for operating expenses including reserves, assumed management, taxes, maintenance...

At this time with higher interest rates, and continued upward prices, cash flow is pretty slim.   I think most buyers are looking at long term appreciation and rental increases over time as we are in a growing city with lots of great amenities, stable employment, college town, etc) or some may think they can move rents higher if below market, but many 2-8 units sell for 12-14 x gross rental income making cash flow not too exciting after operating expenses and debt service with more challenging areas looking better on paper as always.

[Joshua Christensen]

Quote from @Vasundhara Ranjani:

Thanks for all the answers guys.

To break it down a bit further:

1.) I have ~ $1m to invest

2.) Looking at multi-family property (not STR) with professional management (i.e. I will be mostly hands off)

3.) Will be using leverage so that would mean $1m down would enable me to get a ~ $4m property(?).

4.) What areas of Texas and Wisconsin would this most likely work?

 Hey Vasundhara, 

I have a deal in Allen, TX that is actually a $44MM deal that we're raising to close a gap on our funding.  The property is very nice just north of Dallas in the growing area of Allen & McKinney.  208 units. I sent you a DM of the property.