50 vs 150 unit Bldg - Average net cash flow per unit per month

4 Replies

I'm looking at both 50 unit and from 100 to 150 unit buildings and just wanted feedback on what would be an average or expected  monthly net cash flow per unit. I've heard the standard $100 per door discussed as a conservative benchmark but just wondered everyone's thoughts on that, especially as it scales from 50 units up to 150 units or more. For the sake of this example, figure Class B or C apartments and typical mgmt & OH expenses. 

I don't necessarily look at monthly cash flow per unit, I look at the overall investment and consider CoC, IRR, amount of effort/risk with project and more. If you pinned me down on a number I would say that I'm shooting for $200 per door (after stabilization), $100 per door is not going to cut it. I don't think there is much difference between your numbers on a 50 vs. 150 unit+ building when your talking about a rule of thumb like $/door.

BTW, I wouldn't call $100/door a conservative benchmark, it is pretty aggressive/risky actually. If you underwrite at $200/door and you end up at $100/door, fine. If you underwrite at $100/door and end up at $0, not so fine. There's just not enough meat on the bone to underwrite and purchase a deal for $100/door unless you have goals/strategies that are other than cash flow.

Thanks for the response Scott, all good feedback. And yes, I'm very focused on Cash on Cash return and others but was just wondering how this may factor down to the net profit per door when adding another 100 doors (just to see how it helps to saturate some of the carrying costs on larger buildings as it affects NOI)

@Rory Cummins
It all depends on how hands on you are. I’m just about 100% off but I do stay in contact with PM’s and closely watch all the property daily report. It’s definitely safe to say from my experience it’s about $100 per unit net and then factor in vacancy (10%). Multi Family net per door is lower where as SFH is almost always higher. Higher the asset class obviously the less cash flow but my $100 is based on C-C+ multifamily. As said earlier, CoC return of 15% is a solid return as well as total return (cash flow + debt pay down) of 25% is also solid.

Multi’s offer more flexibility and better economy of scale therefore offer less net per door, but it depends on investor approach. I’m only interested in Multis Bc having a property support PM’s allow me to continue to invest.

Good Luck!