When $100 a door becomes a risky proposition

When $100 a door becomes a risky proposition

Investor · Saint Paul, MN · Member since 2015 · 663 posts · 512 votes

It seems as though a lot of BP investors strive for $100 cash flow per door.   I personally don't see how the math works over the long haul.   Fact is an unexpected repair such as a flooding of a basement, a tree falls down after a storm and you need to pay someone to haul it away and taxes go up due to appreciation.   Here is a real situation that is happening to my duplex investment and many others across the country.  Because the housing market is exploding all over the country, property taxes are going up along with inflation.  Houses in South Minneapolis for example have appreciated 22% to 35%.   So this means the city and county are able to raise taxes.   Mine jumped $1,100 in one year.  This is completely justified by the city because of the value of my duplex.  The problem is that now I owe $91.00 more on taxes, which takes my $860.00 monthly cash flow down to $769.00.   Imagine if your duplex or other multi-plex is hoping for that $100 a door and suddenly your taxes are costing you an extra $91.00 a month.  That leaves you with almost nothing for cash flow.  So I personally don't think that number ($100 a door) is a wise figure.  

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Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
9y

Profit in real estate comes from (1) cash flow (2) equity accumulation and (3) property appreciation. Talking about one without the others is not meaningful (not to mention financing differences). $100/door on one property can have a dramatically different IRR than $100/door on another property.

@Linda S. the $100/door figure that investors use includes those $350 service calls...it's after all vacancy, expenses, cap ex reserves, etc.

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  • Rental Property Investor · Dallas/Fort Worth, TX · Member since 2017 · 64 posts · 59 votes
    9y

    Since we are in the early stages of building our portfolio of real estate rental properties, we only have SFRs at this time. We currently obtain $400+/mo cash flow net per property. We are looking for additional SFR properties to add to our investments and will not consider them unless we could get at minimum $200-$300/mo cash flow net based on the purchase price. The real estate market in the area continues to show aggressive gains in home price appreciation annually. The $100/mo per door cash flow would work only if you have economies of scale and/or MFRs as other posters have mentioned.

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