How much should a duplex cash flow a month?

Question

Hello,

I am doing the analysis on 2 duplexes in same property. total cash flow is $500 a month for all 4 units.

Is that a good conservative cash flow? if not what will be the goal.

I appreciate your comments

Ned Carey · Answer

While Jon is 100% correct cash on cash roi is a key metric there are other concerns also. Cash flow per unit is a factor. Each unit involves certain amount of work so most owners want at least $100 a unit. Some expect  $150 or even$200 per unit

Also debt coverage ratio is risk factor. Your NOI (income less expenses other than debt service) should be at least 115-120% of debt service higher is better. I would not do that low. - Ned

Hector Perez · Answer

Thanks Jon, for the feedback.

The cash flow calculated was looking at the gross rent - operating Expenses - Debt service.

I have not calculated the cash on cash return yet, but I will do so.

Take care

Jon Holdman · Answer

IMHO, a better metric is cash on cash return.  If you truly get $500 a month, $6000 a year, and you have $60,000 invested,  you're getting 10% on your money.  I think that's an OK number.  OTOH, if you have $120,000 invested, you're only getting 5%.  For rentals, from a purely cash flow perspective, that's not so good.  Conversely, if you had only $30,000 invested, you would be getting 20%, would would be very good in my book.

But sure you're not using "phony cash flow = rent - PITI".  That significantly overestimates your cash flow.