Some investors net no cash at all, they invest for debt pay down and appreciation. There's nothing wrong with this if it makes sense for them. The net cash you keep will also grow on any property as rents grow.
I think as long as the returns (in their totality) perform better than other more passive investments (Stocks, etc) that is what you want.
Hi Michael, most investors don’t actually get a stable, predictable net percentage of gross rent — it’s really a distribution, not a fixed number. Your 25–30% is actually quite solid. Here’s what I typically see across small multifamily properties:
20–35% in normal years
10–15% in bad years (high repairs, turnover, or vacancy)
35–45% only when everything goes right
The key isn’t hitting a perfect average — it’s understanding how wide that range can actually be. A lot of investors think they’re safely at 30%, but in reality they’re operating in a band that might swing from 15% to 40%+ depending on the year.If you want, share your main assumptions (vacancy rate, repairs, taxes, turnover, reserves, etc.) and I can help you run some quick scenarios to see where the biggest variance is coming from.
I am just wondering if I am doing something wrong by getting this net percentage. I wonder what other investors are getting. I get this percentage from my year end average net. It is really close to my estimated net.
I am just wondering if I am doing something wrong by getting this net percentage. I wonder what other investors are getting. I get this percentage from my year end average net. It is really close to my estimated net.
What makes you think you are doing something wrong?
I am just wondering if I am doing something wrong by getting this net percentage. I wonder what other investors are getting. I get this percentage from my year end average net. It is really close to my estimated net.
What makes you think you are doing something wrong?
I mean, I am wondering if my profit percentages are typical.
I am just wondering if I am doing something wrong by getting this net percentage. I wonder what other investors are getting. I get this percentage from my year end average net. It is really close to my estimated net.
What makes you think you are doing something wrong?
I mean, I am wondering if my profit percentages are typical.
if you live in the area of your rental you can look at your expenses for your residence (if similar) and then look at the market rents vs your rent. use this to get an idea of where things should be based on your own place. Another way is looking at for sale listings that include the expenses for the property (a duplex or fourplex for example). These are just a few ways to get a sense of what things should look like in your area.
Completely depends on area. My north side Chicago rentals spend a fraction of the costs on repairs as my low class suburb rentals. The higher the rents the higher the net percentage also and vice versa.
Some investors net no cash at all, they invest for debt pay down and appreciation. There's nothing wrong with this if it makes sense for them. The net cash you keep will also grow on any property as rents grow.
I think as long as the returns (in their totality) perform better than other more passive investments (Stocks, etc) that is what you want.
Cash flow as a percentage of rent is affected by quite a few things
- LTV: the lower the LTV, the higher the cash flow
- active vs passive: self manage, actively manage repairs and cap items, actually doing maintenance and/or capital items, etc.
- the higher the rent is in comparison to property size, configuration, etc, the higher the cash flow (or worded differently a lower percentage of the rent is likely to be spent on maintenance/cap ex).
- the higher the class of tenant, the higher typically the cash flow (higher class tenants typically have less required maintenance, cap ex items last longer, and lower tenant turn over costs).
Without knowing these items it is impossible to tell if 25% to 30% of rent producing cash flow is good or poor.
Across my portfolio, I project 40% expense ratio not including P&i. I historically do better (spend less). My unit class goes from C- to A-. I am more active than I should be. We self manage the LTRs and use co-host on the STRs. We have our own maintenance team.
Michael 25% to 30% net is not necessarily low — it depends heavily on how you are calculating it and what expenses you are including before you land on that number.
Here is the honest benchmark:
The 50% rule is a common starting point. Half of gross rental income goes to expenses — not including mortgage. Operating expenses, taxes, insurance, maintenance, vacancy, and management typically consume 40% to 50% of gross in a well run portfolio. What is left after mortgage debt service is your actual net.
In a market like Nashville with strong appreciation and higher property values — 25% to 30% net is actually reasonable if your properties are leveraged. Cash on cash return matters more than net percentage in an appreciating market.
Where landlords lose net margin without realizing it:
Deferred maintenance that becomes expensive repairs. Vacancy periods not budgeted for — even one month empty on an annual basis is roughly 8% of gross income gone. Management fees if you are using a property manager. Utilities paid by landlord that creep up over time.
The more important question is whether you are tracking every expense accurately by property. Landlords who reconstruct expenses at tax time consistently undercount what they actually spent — which artificially inflates the net percentage they think they are keeping.
Clean records tell you your real number. Not an estimate.
25% to 30% is worth digging into but it is not automatically a red flag.