Average Net Cash Flow ? (Per door)

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Average Net Cash Flow ? (Per door)

Nate Sanow
I​nvestor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes

Hi all,

I know there's CAP rates, ROI / NOI, 1% rules, but in terms of cold hard dollars, I'd be fascinated to know what you average real life positive cash flow per door is, on average, per month. I'm just asking for my own selfish motivation / inspiration and to dial in a buy and hold strategy. It can be without expenses for simplicity sake. Or included.

Simply put: per rental do you get $100-$500 net cash per month? (Example dollar amount)

I'd prefer SFR examples, because obviously larger apartment deals while really juicy are also at a scale I myself cannot yet reach.

I’m also curious for those who have achieved early FI how many doors it took.

I tried to see if already on a forum but didn’t see it, so thanks in advance if you do respond!

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Ray Johnson
Irvine, CA · Member since 2016 · 545 posts · 614 votes
7y

I agree with @Joe Villeneuve regarding the additional metrics. @Nate Sanow I looked at a deals for a guy last week and he was reflecting cash flow of $208.75 in month two of having a tenant. 

I said I don't see at what point in the timeline you Break-even and actually start making money, He asked what I meant, he said I get a tenant in the second month in my analysis, that's when I start to cash flow. I told him until you get all of your initial cost (closing cost, purchase cost, down payment, etc..) You don't have any cash flow, you have reimbursed owner funds received from rent in the amount of $208.75, you basically prepaid the rent for the tenant at closing and they are paying you back in monthly installments until all of your cash is out of the deal.

I showed him he doesn't have true cash flow until year 7 on the deal when he gets his $18,800 in cash out of the deal (down payment, closing cost, etc). With the caveat that he doesn't have to purchase a CapEx items early based on monthly set-asides or rehab a trashed property beyond normal wear and tear.

So in Joe's defense, your question is asking for "Net Cash Flow" which will include the need to factor in all cash initially invested being out of the deal. A person with a property in year 1 or 2 saying they have $400 a month in cash flow means they are missing a key metric in the information they are giving you unless the deal was100% financing and the only cost they paid out of pocket is the inspection cost, appraisal cost, and closing cost.

If you're doing a BRRR the timeline gets shorter to start cash flowing but most deals do not cash flow early on.

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  • Henry Lazerow
    Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    7y

     @Antuan La How you are you calculating this 27% COC? The way I would run numbers.....

    $750 rent * .95 vacancy * .98 leasing * .9 property management = $628 gross rent

    $75 taxes (will vary by city)

    $50 insurance (will vary by city)

    $50 trash/water (will vary by city)

    $175 cap/ex wear/tear w/ averaging out bigger ticket items dividing their cost by life span. A water heater and furnace cost the same in a $37k place as a $200k place so doing cap/ex by a % of gross rents does not work accurately

    Total expenses: $350

    Net cashflow per month = $278 with $37k down that is under 10% COC

    With leverage let's say $10k down and add a $30k mortgage expense (close costs/fees) so adds $161 per a month to expenses now at $511 expenses and net cashflow of $117 a month 11.7% COC

    2Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    7y
    Originally posted by @Syed H.:
    Originally posted by @Joe Villeneuve:
    Originally posted by @Syed H.:
    Originally posted by @Ray Johnson:

    I told him until you get all of your initial cost (closing cost, purchase cost, down payment, etc..) You don't have any cash flow,         

    This makes absolutely no sense. 

     What part don't you get?

     I get it, it just makes no sense. An investments cash flow isn’t judged by being paid back your equity first. That’s not how investments are evaluated and compared by most people, and def not by most professional shops. 

    Anyways, I net $210/unit on my MF portfolio. 

    That’s with 25% down. Taking into account vacancy, mgmt, regular expenses, reserves, repairs, and my mortgage. Principal reduction isn’t included.

    Profit doesn't happen until you get all the cash you put in back. When you put more money in (cash) upfront, you are only putting your cash flow in upfront...before you get it. REI should not be analyzed like other investments. If you do, you are missing out on most of the advantages, and rationalizing bad deals into good ones based on "%'s" instead of dollars. I've never spent a "%" in my life.

    5Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    7y
    Originally posted by @Syed H.:
    Originally posted by @Joe Villeneuve:
    Originally posted by @Syed H.:
    Originally posted by @Ray Johnson:

    I told him until you get all of your initial cost (closing cost, purchase cost, down payment, etc..) You don't have any cash flow,         

    This makes absolutely no sense. 

     What part don't you get?

     I get it, it just makes no sense. An investments cash flow isn’t judged by being paid back your equity first. That’s not how investments are evaluated and compared by most people, and def not by most professional shops. 

    Anyways, I net $210/unit on my MF portfolio. 

    That’s with 25% down. Taking into account vacancy, mgmt, regular expenses, reserves, repairs, and my mortgage. Principal reduction isn’t included.

     What would you cash flow if you only put 20% down?

    2Reply
  • Syed H.
    Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes
    7y
    Originally posted by @Joe Villeneuve:
    Originally posted by @Syed H.:
    Originally posted by @Joe Villeneuve:
    Originally posted by @Syed H.:
    Originally posted by @Ray Johnson:

    I told him until you get all of your initial cost (closing cost, purchase cost, down payment, etc..) You don't have any cash flow,         

    This makes absolutely no sense. 

     What part don't you get?

     I get it, it just makes no sense. An investments cash flow isn’t judged by being paid back your equity first. That’s not how investments are evaluated and compared by most people, and def not by most professional shops. 

    Anyways, I net $210/unit on my MF portfolio. 

    That’s with 25% down. Taking into account vacancy, mgmt, regular expenses, reserves, repairs, and my mortgage. Principal reduction isn’t included.

    Profit doesn't happen until you get all the cash you put in back. When you put more money in (cash) upfront, you are only putting your cash flow in upfront...before you get it. REI should not be analyzed like other investments. If you do, you are missing out on most of the advantages, and rationalizing bad deals into good ones based on "%'s" instead of dollars. I've never spent a "%" in my life.

     I disagree. A % = $. Your equity is still in the deal. 

    Anyways, let’s agree to disagree. 

    2Reply
  • Syed H.
    Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes
    7y
    Originally posted by @Joe Villeneuve:
    Originally posted by @Syed H.:
    Originally posted by @Joe Villeneuve:
    Originally posted by @Syed H.:
    Originally posted by @Ray Johnson:

    I told him until you get all of your initial cost (closing cost, purchase cost, down payment, etc..) You don't have any cash flow,         

    This makes absolutely no sense. 

     What part don't you get?

     I get it, it just makes no sense. An investments cash flow isn’t judged by being paid back your equity first. That’s not how investments are evaluated and compared by most people, and def not by most professional shops. 

    Anyways, I net $210/unit on my MF portfolio. 

    That’s with 25% down. Taking into account vacancy, mgmt, regular expenses, reserves, repairs, and my mortgage. Principal reduction isn’t included.

     What would you cash flow if you only put 20% down?

     I think roughly $195/unit.

    Oh my numbers were with a 20 year amortization.

    I actually net much higher because I have much lower vacancy than I underwrite to and also self-manage. But for simiplicity’s sake I bid/buy based on market rate assumptions. 

    2Reply
  • Rhonda Wilson
    Rental Property Investor · Tacoma, WA · Member since 2018 · 113 posts · 149 votes
    7y

    We have a lot of C-class apartments mostly built in the late 70s early 80s. These numbers are rough, because buildings are different, apartment sizes are different, etc. 

    75% LTV buildings about $200 per door

    0% LTV buildings about $500 per door

    2Reply
  • Ray Johnson
    Irvine, CA · Member since 2016 · 545 posts · 614 votes
    7y

    @Syed H. @Joe Villeneuve I come from the "professional shops", the Institutional Private Equity and REIT industry, that's exactly how it's done when investments are evaluated, your Financials do not show any profit until all of your initially invested cash has been repaid by the Asset via Monthly, Quarterly, Annually distributions, or at the closing of Sale.

    You may be getting a pay check, cash flow, or some other form of compensation from the operations of the asset going into your bank account but the asset hasn't generated actual profit to the bottom line until all of your invested cash is out of the deal.

    Take a look at either your Retained Earnings line (if you're reinvesting cash into the asset), your Shareholders Equity (if you have partners and are pushing out K-1's, at the end of the year) or Owners Equity line on your Financials, you will clearly see what I'm talking about, the financials don't lie unless you're cooking the books or doing them wrong. This line on your Financials represents your real NET Income earned on the asset.   

    Like @William C. pointed out, there are other variables that can skew the cash flow number every month to get a wide range of responses for numbers on an asset.

    When I'm not talking to someone with a background in Finance or Accounting I try to simplify statements which is what I've done here with my responses, if not we'd be getting into the weeds on these post talking about EBITDA and other variables when we discuss our numbers on our assets.

    7Reply
  • Douglas Gratz
    Rental Property Investor · Philadelphia, PA · Member since 2018 · 260 posts · 145 votes
    7y

    I would like to know what people think a god ROI is on duplex/triplex's. I just bought a duplex that will return 12% bought it for 125k 15 in work so all in 140k my cash flow is 1500 a month or 18k a year.

    This comes to 12% ROI. My question is, is this good?? I can't seem to grasp if I'm buying the right investments?

    I know it’s all relative to my plan etc etc, but overall what is considered poor and what is considered good .

    Thanks for the help in advance!

    1Reply
  • Nate Sanow
    OP
    I​nvestor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes
    7y

    I've got SO MUCH to get back to.  Thanks to everyone for the feedback.  Personally, I just wanted examples of net cash.  But the advanced breakdowns are of course welcome and actually noteworthy.  I look at it like this.  Formula's and calculations certainly can predict or provide recent averages, but when the rubber hits the road we all want to know the exact amount of money in our bank account.  We all want to know the exact amount of income we make (assumption w2 earners).  In the income example maybe there is a way to look at it pre-tax on gross income for what we declare to a lender etc as our actual earned overall income; and maybe some prefer to look at net income after taxes.  

    To me the same holds true with my goals for REI. I'd like to know what is a reasonable amount of income to expect in __________ years from passive income. Cold hard cash. Like anything, it will probably go up and down. If I had a pizza shop that grossed me personally 100k in profits, I am sure there would be years that my cheese and tomato sauce expenses would increase. If that became a problem, maybe I'd offset it by buying a cow or growing a garden. But I would know that it is possible to make 100k from pizza.

    So, I want to get back to everyone personally but let me say to all I'm thankful for all the feedback because I take it as inspiration and motivation to get to where some of you already are, and that was my primary objective.  Thanks!!!!! 

    1Reply
  • Nate Sanow
    OP
    I​nvestor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes
    7y

    @Wayne Bodley thanks man!  And good for you.  

    0Reply
  • Nate Sanow
    OP
    I​nvestor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes
    7y

    @Douglas Gratz seems like a lot of people I've worked with and gotten to know want at least 1% back on their money per month  to call it "good."  Example is 100k house should get 1k per month.  200k house should get 2k per month.  So, you are slightly above 1% in your example, which is probably makes it "good."  I think it depends on your goals and if you wanted to find other markets where maybe 2% is possible.  I know of some if you want to message me; but I am assuming you'd want to or be ready to invest out of state.  If you want to stay local, then your return probably is good.  Not sure if others agree just my 2 cents.  

    0Reply
  • Nate Sanow
    OP
    I​nvestor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes
    7y

    thank you @Rhonda Wilson !!!!!!!!!! good for you.  

    0Reply
  • Nate Sanow
    OP
    I​nvestor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes
    7y

    thank you @Syed H.

    0Reply
  • Nate Sanow
    OP
    I​nvestor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes
    7y

    @Henry Lazerow I admire your advanced breakdown.  Thanks for sharing.  Good stuff.  

    1Reply
  • Nate Sanow
    OP
    I​nvestor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes
    7y

    @Christina Linn those numbers sound really good.  thanks for sharing.  

    0Reply
  • Nate Sanow
    OP
    I​nvestor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes
    7y

    @Rich Wilken sounds like you are in a good market!!!  And doing something right.  thanks for giving me your feedback!!!!!!!

    0Reply
  • Syed H.
    Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes
    7y
    Originally posted by @Ray Johnson:

    @Syed H. @Joe Villeneuve I come from the "professional shops", the Institutional Private Equity and REIT industry, that's exactly how it's done when investments are evaluated, your Financials do not show any profit until all of your initially invested cash has been repaid by the Asset via Monthly, Quarterly, Annually distributions, or at the closing of Sale.

    I do as well. I worked in NYC CRE & have my masters in RE finance & development.

    I think we’re talking about two different things. You’re speaking more like an accountant than an acquisitions guy. I understand where your coming from. For simplicity’s sake, like you said, speaking in net per door, cash on cash; etc etc, is just a way to compare similar deals. 

    2Reply
  • Ned J.Pro Member
    Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes
    7y

    Such a loaded question......and MANY discussions on this "question" in the past

    You cant compare units that are fully paid off to ones that are at 70-80% LTV.......

    Some people post numbers based on gross cash flow and don't account for all the expenses you need to take out for real cash flow numbers etc...while other post net cash flow after all those expenses are accounted for.....

    So many variables that there is no great number to shoot for....so be really careful that you compare apples to apples..

    2Reply
  • Syed H.
    Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes
    7y
    Originally posted by @Ned J.:

    Such a loaded question......and MANY discussions on this "question" in the past

    You cant compare units that are fully paid off to ones that are at 70-80% LTV.......

    Some people post numbers based on gross cash flow and don't account for all the expenses you need to take out for real cash flow numbers etc...while other post net cash flow after all those expenses are accounted for.....

    So many variables that there is no great number to shoot for....so be really careful that you compare apples to apples..

    Great answer! 

    0Reply
  • Kenny Kamdoum
    Germantown, MD · Member since 2017 · 28 posts · 7 votes
    7y

    @Russell Brazil If you don’t mind me asking, how long did it take you to get to that amount per month?

    0Reply
  • Kenny Kamdoum
    Germantown, MD · Member since 2017 · 28 posts · 7 votes
    7y

    @Levi T.sweet deal man. And I agree, 100 doors at 200+ is much better that 10 doors at 900. I see you also buy MF, how much per door do you get with those type of deals?

    1Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    7y
    Originally posted by @Kenny Kamdoum:

    @Russell Brazil If you don’t mind me asking, how long did it take you to get to that amount per month?

     Ive got 1 property Ive had 10 years now, that one has free cash flow of $1600 per month. That property initially had a payment of $1700 and rented for $1900.  Today it rents for $2900 and a refinance brought my payment down to $1300.  The properties Ive owned the longest and in the higher demand locations like that one, drag my average up.  Ive got a couple of cheap condos at $400 free cash flow per month that are in less desireable locations, where the rent hasnt budged since I purchased 7 years ago.

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  • Kenny Kamdoum
    Germantown, MD · Member since 2017 · 28 posts · 7 votes
    7y

    I think that location also has a big impact on how much per door you can make. Because we can get all excited reading the numbers that people post but have no idea how much headaches they have to go through to get to that number. I’m new still but this is a great post so I know a little bit of what to expect from my investments.

    2Reply
  • Dwayne Lee
    Rental Property Investor · Jersey City, NJ · Member since 2018 · 10 posts · 2 votes
    7y

    @Nate Sanow Great question! $ amount per month is very simple and is a way I like to simplify my investments.

    I brought my first two SFR cash and have been pocketing the full amount of rent for the last 2/3 yrs. I have recouped my initial investment on each and will refinance soon.

    I recently just purchased a SFR using a conventional loan and I'm bringing home $665 per month after all expenses paid

    Everyone has their own preferences and each market will dictate said preferences.

    That said going forward , in my market, I will be looking for at least $650/month on every deal or I will pass it up and continue to look.

    Be patient and when the time is right you will know

    Good Luck

    0Reply
  • Lawrence Paul
    Rental Property Investor · Montgomery County · Member since 2019 · 72 posts · 9 votes
    7y

    If I was to cash out refi at 20% (BRRRR), I would be generating an honest $100/mo including vacancy/repair/cap ex/ect.

    Right around 16-18% Cash on cash.

    0Reply
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