What’s your cashflow?

17 Replies

@Brandon Turner on a few podcasts mentioned a minimum standard for SFR cashflow. More is certainly better, but he used $100 as an example of what he needed for monthly cash flow from a property. For the buy and hold folks, I’m wondering what you are actually able to achieve in you areas. What’s your cashflow on your average SFR unit in 2018? I have one rental that is almost completely paid off, and would like to compare its cashflow against what other newer investors are able to achieve. I’d also like to hear what the more seasoned investors are achieving so we can compare.

Hi @Douglas Pollock every deal is different and each market is different. For example, if you are in a more expensive market, your minimum net may be $500, but if you are investing in the midwest/south, you can decide to use $150 or $200 per door. I always aim for $200 net per door. Some of my properties generate over $300 and some are just under the $200, but when I started out, that was my number. 

Originally posted by @Dustin Beam :

I think cash on cash return is more important.

 Yes, this is what I really look at. I am doing about 13-18%. In my area, $100/door would not get it done.

Originally posted by @Douglas Pollock :
@Scott Weaner Good point. Are there better metrics? With COC = NOI / Initial investment, then is it really fair to compare the COC from year one with year 31? The cashflow increases significantly once the mortgage is paid off.

 At some point return on equity should be used if substantial appreciation or debt pay down has occurred. But of course, what a person does with that depends on how comfortable they are with leverage, risk, etc. 

The funny thing with REI, each asset typically will perform worse over time as far as percentages go, even if cashflow continues to go up. To me, those percentages are important when in growth mode (where I'm at) but much less so if you've reached your goals.

@Dan Barli . Thank you. Your answers help me gauge my own expectations. It sounds like you’re normal range is in the $200 to $300 range, with a few outliers above and below those amounts. Would you say the amounts are tied to any primary variables? In other words, did they start high and trend lower, or correlate with a specific geographic area, or maybe have something to do with experience level as you progressed?
@Dustin Beam I’m near the transition point from my current career path into something else. I’m only 45, and have a pension pending of a little over $50K/year. I’m also nearing the payoff date of property 1. So, while many are trying to accumulate as many doors as possible in order to start the machine, I’m trying to figure out how to keep the doors down to a minimum while generating enough cash to replace the other half of my income. My high equity home could be churning out over $1K per month, which is well above the $500 someone mentioned earlier in the thread. Of course, the ROI of the equity is low but the high security as I head into my 50’s is a great feeling. I think two or three more doors on 15 year terms will be an adequate amount of income when paired with the pension as I head into my 60’s. If the politicians haven’t spent by social security I might actually receive some of that too! My wife is several years younger, so her income provides a third leg for the stool.
Originally posted by @Douglas Pollock :
@Brandon Turner on a few podcasts mentioned a minimum standard for SFR cashflow. More is certainly better, but he used $100 as an example of what he needed for monthly cash flow from a property.

For the buy and hold folks, I'm wondering what you are actually able to achieve in you areas. What's your cashflow on your average SFR unit in 2018?

I have one rental that is almost completely paid off, and would like to compare its cashflow against what other newer investors are able to achieve. I’d also like to hear what the more seasoned investors are achieving so we can compare.

 At a $100 rate I wouldn't be interested. One month of vacancy wipes that out. Here is what I do

Average Cash Flow Per Door In Phoenix Metro Area

https://www.biggerpockets.com/forums/600/topics/58...

I think the whole cash flow game is flawed.   When Brandon Turner is saying $100/month positive cash flow it means you have accounted for ALL expenses, current and future.    Build in routine maintenance, capital expenditures (based on current life, expected replacement costs),  potential vacancy, management costs ,any other expenses.

I think asking someone about their monthly cash flow is totally misleading if you are missing all the calculations.

After buying 11 out of state properties in 5 states. $500 above the PITI is almost breaking even or $100/month. Vacancy, eviction, capital expenditures, bad property management are extremely expensive!

I really think cash flow game is over-rated if are not going to scale to 10+, 20+, 30+ units.    Only way to do that without going insane is create great systems, SCALE, buy over a long period of time or buy multifamily.

Everyone's perspective is different based on their own goals and life situation.

I am in Salt Lake City utah and only purchase properties that are duplex, triplex or Mother in law single family that net $500 a door / $1,000-$1,500 a property.  Average purchase price of $300,000.  I put very little down in general. These homes do need about $10,000-$15,000 put into them to get them rent ready. I usually end up with $40,000-100,000 equity 3 months after purchase. 

@Douglas Pollock I think they vary based on the markets you invest in. As some people said, $100/door is not worth it to them. If you are in high-priced markets like NYC/California, even $200/door probably wouldn't be worth it. You want to try and achieve the 1% rule and then determine what your criteria are for your net cash flow per door. What makes it worth it for you? As you can see, everyone uses different criteria and there's not a really a right or wrong approach, just what works for you personally. 

Originally posted by @Douglas Pollock :
@Dustin Beam I agree, but for the sake of argument, what kind of amounts are you able to achieve as the markets corrected? Or, if you’d prefer to add the cash on cash, what have you been achieving lately?

 I'm settling into my latest purchase. They were purchased with a 1031, so down payment was about 30%, and were less than half full. I'm expecting something around $300/door with my current terms after capx, vacancy, etc. That would be around 12- 14% cocr. Just got to 100% occupancy, so time will tell. 

BTW, Brandon has said he shoots for 100 per door if fully financed and after all expenses and vacancy (if I recall correctly). I think my current properties would be similar to that with no down payment. 

Originally posted by @Douglas Pollock :
@Dustin Beam I’m near the transition point from my current career path into something else. I’m only 45, and have a pension pending of a little over $50K/year. I’m also nearing the payoff date of property 1. So, while many are trying to accumulate as many doors as possible in order to start the machine, I’m trying to figure out how to keep the doors down to a minimum while generating enough cash to replace the other half of my income. My high equity home could be churning out over $1K per month, which is well above the $500 someone mentioned earlier in the thread. Of course, the ROI of the equity is low but the high security as I head into my 50’s is a great feeling. I think two or three more doors on 15 year terms will be an adequate amount of income when paired with the pension as I head into my 60’s. If the politicians haven’t spent by social security I might actually receive some of that too! My wife is several years younger, so her income provides a third leg for the stool.

And minimizing risk does make sense for some like you for sure. Return on equity is really an opportunity cost calculation. And that needs to be weighed heavily against risk. Risk is much harder to quantify as a number, but if goals are being met and your risk is low, who cares if you're sacrificing opportunity? 

Reaching your goals are all that really matter. Exceeding them may not do anything to change your life

@Dustin Beam Thank you for your reply. I’ve been exploring my options. I had not taken into consideration that some people do not take all expenses into consideration. If I knew then what I know now, I might have made other choices. I did learn about something today that I haven’t heard discussed..at least not that I recall. I found out about recasting. A buyer can reduce payments for the remaining term by paying a lump sum of money. For a few hundred dollars, I could use some of my cash to pay principal on all remaining payments. Some people use this method if they haven’t sold their old home prior to closing on their new home. Once the old home sells, they recast the proceeds of the sale in order to lower their mortgage payments on the new home. Recasting is drastically less costly than a refinance.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you