Million dollar cash flow question!

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Million dollar cash flow question!

Gerard Aliberti
Rental Property Investor · Westchester County NY · Member since 2021 · 26 posts · 23 votes

My biggest question in real estate investing is which has kept me from moving forward is: I keep hearing how so many people target a $100 per door positive cash flow goal per month. How do you scale such a small amount into financial freedom without driving yourself crazy with so many doors??? Also, without having millions to invest up front, how can someone scale to 15k per month of cash flow in several years and not take 20 years?

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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
5y

First, if $100.door is a goal, you'll lose money.  That's negative CF waiting to happen.  If all I got was $100/door, I'd be selling those properties as fast as I could.

Second, you have to understand that the property isn't your asset, the CF and equity in those properties are.  In order to scale, you have to keep your assets moving forward into new properties...on a regular basis.  Each time you move it forward, you should be increasing both CF and property values, as well as equity by default.  The faster your assets move, the faster (and larger) your assets will grow.

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  • Jeremy Gaal
    Rental Property Investor · Colorado Spgs, CO · Member since 2020 · 91 posts · 61 votes
    5y

    @Gerard Aliberti there are some great insights in this post. With that said you havs to figure out what works for your area..... For example, here in Colorado Springs it is a challenge to find a property that cashflows (especially with some property tax increases coming up). What has been working for me is targeting a minimum 200/month cf, which has surprisingly led to me buying some new build townhouses.

    Anyway, talk to locals in your area and find out what they are seeing/finding in the market. They may even be able to lead you towards deals as well. Best of luck!

    1Reply
  • Gerard Aliberti
    OP
    Rental Property Investor · Westchester County NY · Member since 2021 · 26 posts · 23 votes
    5y

    @Jeremy Gaal

    Thanks, I've talked to several realtors and they say they haven't been able to find properties for themselves the past few years. So I'm having the same cashflow issue.

    0Reply
  • Gerard Aliberti
    OP
    Rental Property Investor · Westchester County NY · Member since 2021 · 26 posts · 23 votes
    5y

    @Dominic Olguin

    Understood, thank you!

    0Reply
  • Jeremy Gaal
    Rental Property Investor · Colorado Spgs, CO · Member since 2020 · 91 posts · 61 votes
    5y

    @Gerard Aliberti is there a solution to rent by the room, perhaps near a college? Possibly look towards an area 30-45 minutes away that may do a little better for you?

    1Reply
  • Gerard Aliberti
    OP
    Rental Property Investor · Westchester County NY · Member since 2021 · 26 posts · 23 votes
    5y

    @Nicolas Nuvan

    From what I heard from several people, is NYC prices dropped during the pandemic bc everyone moved out and moved to suburbs. Homes near me, including mine, have skyrocketed! Thanks for the reply

    1Reply
  • Gerard Aliberti
    OP
    Rental Property Investor · Westchester County NY · Member since 2021 · 26 posts · 23 votes
    5y

    @Jeremy Gaal

    I think that's my next step. Expand my distance.

    1Reply
  • Nicolas Nuvan
    Real Estate Agent · Brooklyn & Queens · Member since 2020 · 49 posts · 22 votes
    5y

    @Gerard Aliberti Prices have also increased here. Bidding wars on all properties worth buying.

    0Reply
  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    5y

    @Gerard Aliberti

    Buy as many doors as you can.

    $100 per door is not set in stone, it’s only a popular number. I normally shot for minimum of $200 per door as monthly “Pure Cash-Flow”.

    Equity is what really makes people money/fortune in Real Estate Investing. Cash Flow is what allows you to weather the storms and the bumpy roads along the way.

    Goodluck🙏🏽

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    6Reply
  • David Adams
    Rental Property Investor · Lafayette, LA · Member since 2019 · 40 posts · 42 votes
    5y

    @Joe Villeneuve

    Joe . You are right on

    0Reply
  • Gerard Aliberti
    OP
    Rental Property Investor · Westchester County NY · Member since 2021 · 26 posts · 23 votes
    5y

    @Wale Lawal

    Thanks for the feedback. I need to get moving!

    0Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    5y

    Lets do some calculation with the most common scenario in average CF market.
    Assume Overall rent to ratio: 1.0
    Price: 100k , rent is $1000
    25% LTV 3.5% rate 30 year FRM: PITI= $530 ( mortgage $32/mo ; insurance $1000/yr + tax $1500 year)

    Proprty Management fee: 10% or $100
    Your cash flow: $1k-$630= $370

    However, your "actual" R/M expense will be $250-$350/mo. So you'll net $100-$150. Key here is you need to buy turnkey quality otherwise the R/M will kill the cash flow. That's why I recommending putting 35% (if rent ratio is <= 1.0) or you buy property where the rent ratio is much higher than 1.4 then you can buy with 25% down. 

    2Reply
  • Jonathan StonePro Member
    Rental Property Investor · Camas, WA · Member since 2020 · 284 posts · 202 votes
    5y

    @Gerard Aliberti

    Also realize that year 1 CF isn’t your forever cashflow. I rented a place I managed for a friend @$2695 in 2011. He was break even that same tenant is in place an paying $3150 now. They paid down 200k in principal and he is CF around 500$/month.

    I like to look at my projections for any business through the first 5-7 years and make sure of the economy changes and something we’re to bump say 10% in one direction I’d still be okay with the deal. Past that 7 year mark seems to me to far to forecast in economic cycles. I’m sure pros do it though.

    4Reply
  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    5y

    @Gerard Aliberti

    Yes sir. Keep moving

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    0Reply
  • Nicole W.
    Rental Property Investor · L.A. Ca · Member since 2020 · 120 posts · 43 votes
    5y

    Find somewhere that does cash flow well and invest there. I did that and it works well. If you can get 1 property mgr over a few, you can keep the management fee down. I live in Ca and was having an issue with finding cash flowing rentals and just went out of state. I have great property mgrs and do just fine. 

    2Reply
  • Tyler Williams
    Dentist · Taylorsville, UT · Member since 2013 · 102 posts · 68 votes
    5y

    @Gerard Aliberti

    Great question. The question I have for you is what’s your end goal?

    $100 per door isn't as important as the COC ROI (cash on cash Return on Investment).

    Essentially divide your monthly cash flow by your initial investment.

    What do you have to look at is what would you expect as a reasonable return if you invested that money into something else, like a business or stocks etc.

    For example if you only had to put $10,000 down on a property and your cash flow was $100 a month, that would be $1200 per year / $10,000 or 12% COC-ROI. That's pretty good, especially in the current market.

    If you put $100,000 down and cash flowed $1200 per year or $100 per month, that would only generate a 1.2% COC-ROI.

    Your Real money comes as:

    1. you pay down the mortgage with the help of your tenants, increasing your equity.

    2. The property appreciates - increasing your equity.

    3. Depreciation and tax savings.

    4. Most important - monthly cash flow, which increases over time as your mortgage goes down or is paid off and rents increase over time.

    Hope that helps. Keep asking great questions and you’ll be on track to be a pro!

    5Reply
  • Jonathan StonePro Member
    Rental Property Investor · Camas, WA · Member since 2020 · 284 posts · 202 votes
    5y

    @Tyler Williams

    I really like your answer but I don’t know that there is a most important of your 4 parts if making money in the deal. Some need the tax breaks more than appreciation or cashflow. Others need to grow their cashflow overtime. Others maybe in a high priced market actually make the largest portion from mortgage pay down over time.

    1Reply
  • Grey Stone
    Investor · Palmdale · Member since 2016 · 112 posts · 80 votes
    5y

    A lot of people that target $100/door are usually using brrr and have very little to no cash in the deal. They continue to recycle the original money they put down and take profit along the way, while getting $100/month per door. I prefer to focus cash on cash return and stay above 15% CoC. The property must have a clear benefit (special zoning, value add, path of progress, etc). My properties have a cash flow between $640-980/month per door. They didn't all start out like this, rents will go up over time and so will your equity through tenants paying down your mortgage and inflation. Every market is different too, and you have to see the opportunity and know why you are buying something before you make an offer. Some of the properties, we had idiot agents literally tell us it was not a good investment or we are buying at the peak, but they had equity and cash flow....go figure, lol.

    0Reply
  • Gerard Aliberti
    OP
    Rental Property Investor · Westchester County NY · Member since 2021 · 26 posts · 23 votes
    5y

    @Nicole W.

    Nicole, that seems to be what I need to do. For me it's a trust issue, being so far away from my investment and relying on strangers to take care of it. I need to get over that of I'm ever going to get into real estate investing. Thanks!

    0Reply
  • Gerard Aliberti
    OP
    Rental Property Investor · Westchester County NY · Member since 2021 · 26 posts · 23 votes
    5y

    @Jonathan Stone

    Thanks for the response!

    0Reply
  • Gerard Aliberti
    OP
    Rental Property Investor · Westchester County NY · Member since 2021 · 26 posts · 23 votes
    5y

    @Tyler Williams

    Tyler, Thanks for the reply. My end goal is to quite corporate america asap!! Lol. It's been years I've been talking about getting into real estate but my local market is high with crazy property taxes so finding deals in within 25 miles is not easy. I need to do more research and find places further away with a property manager but how do I bring myself to put a chunk of money in an investment and hope a stranger is taking care of it. I need to figure that out.

    0Reply
  • Curt Smith
    Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes
    5y

    @Gerard Aliberti Joe's comments are valuable and from His experience. Today it's near impossible to buy better and better property. Today, I suggest we keep good assets, rent increases every year. I buy at $300+/door, next year it's $375 etc. Then brrrr when equity is about double.

    To all, read my paper linked off my profile 1st paragraph, hiw to buy a bullet proof portfolio. It's the core principles of buy and hold fir profit and ease.. :)

    Best to all.

    0Reply
  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    5y
    Originally posted by @Gerard Aliberti:

    @Joe Villeneuve

    Joe thanks for the reply. I agree with the 1st part bc $100 door is very low. As far as second part, are you saying to pretty much do the brrr method and just keep refinancing and buying more property? At what point is it too much leverage?

    If you're thinking about SFR, then yes - $100 / door / month is a rather low. Then again, that's $1,200 / year. Ten of those are $12,000 / year. That's still less than Social Security, though. Better positive cash flow can help quite a bit.

    For Multi-family, $100 / door over 300 doors is  $360,000 / year, gross. If your expenses are 50%, that's $180,000 net income. You can easily double that or more.

    Remember to figure debt service into your net-net cash flow.

    Perhaps the question is do you want to be a "millionaire" or do you want to live comfortably?

    Of course, rental properties build equity and equity is a big chunk of your net worth. THAT is where you can achieve "millionaire" status, if that's your goal.

    My $0.02 ...

    0Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    5y

    Truth is, investing in 2021 is very different than investing in 2009 due to cap rate compression.
    Largely there's not too many good opportunities in cash flow market as price is already hiking up, if we want to invest in REI we need to factor in IRR/appreciation/inflation factor as well.

    Nowadays even syndication can only produce NET 4-5% cash-flow income with 10-12% IRR. Gone of the days of large cash flows.

    0Reply
  • Casey Purvis
    Investor · Redondo Beach, CA · Member since 2018 · 12 posts · 3 votes
    5y

    @Gerard Aliberti

    Hey Gerard, I was in the single family investor space for 5 years and I never purchased anything that would produce less than $300.00 per month per house but still found it difficult to scale due to repairs, upkeep, make ready"s every time we lost a tenant and had to prepare for a new one, so I started investigating the multifamily space and the syndication process.

    This fascinated me so I dove in head first and got educated and paid for a mentorship, ( Which initially I was very apprehensive about) but it has made a huge difference.

    Dig in and get educated, have non stop tenacity and take small steps forward every day and you will succeed.

    2Reply
  • Casey Purvis
    Investor · Redondo Beach, CA · Member since 2018 · 12 posts · 3 votes
    5y

    @Gerard Aliberti,

    I absolutely would recommend the BRRR method. It's what got me started. The whole point to it is there are so many ways to buy your first or multiple properties without a big down and you won't run out of money. Anyone that wouldn't recommend the BRRR method is someone who doesn't truly understand it or has not mastered it. But again it is always difficult to scale in the single family space. Just my opinion.

    0Reply
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