I'll cut right to it. I found that pros say $175 per door is the typical expected cash flow per unit after all expenses AND principal and interest payments.
I was wondering how accurate is that number is? Anyone can chime in of course, but I'd like to hear from anyone with commercial real estate experience.
@John Jaweed What size deals are talking about? My team focuses on > 100 unit properties, and we see much higher cash flow than $175. I'm guessing it's all relative anyway. Deal size, market, property class, etc. will all impact any sort of average metric like this.
@Bryant Patterson 50 or less units.
What kind of free cash flow are your deals averaging if you don't mind me asking?
On a 150 unit deal in suburban Austin, TX, we are getting $500/unit/month. It’s hard to compare a deal this size with one under 50 units. There are some real economies of scale when you can spread your uncontrollable expenses like management fees, insurance, and taxes across more units.
For the banks the key metric is DSCR. See:
They're usually looking for DSCR > 1.2 at least. If NOI is $ 500,000 and annual debt service
is $ 300,000 then DSCR = 1.67 which is a good thing.
@Bryant Patterson you are getting $500/month after all expenses, reserves and debt service?
Or is this before debt service?
Cash flow per unit doesn't tell the whole story. You have to consider your cost per unit as well. I have a complex that cost me 24k per unit, it cash flows about 165 per unit. I have a complex that costs about 60k per unit and cashflows about 275 per unit. Which one returns better? The 24k obviously... BUT I am paying more down per unit per month on the 60k per building.. Like I said it don't tell the whole story. Just a general metric to start with.
$500 per month per unit cash flow after all expenses and debt service?????
It is after all expenses, debt service, and an asset management fee. But it's all relative. This is a Class A deal in a upper middle class suburb of Austin. It cost $25M to build, so it better be getting some good cashflow otherwise our equity partner won't be very happy!
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