What do you consider a "good" cash flow for a property in 2024?
Rene HosmanPro Member
Rental Property Investor · Denver, CO · Member since 2024 · 583 posts · 653 votes256 votes total
What do you consider a "good" cash flow for a property in 2024?
Most Popular Reply
If as you say, you're not considering this in a vacuum, then why even single out cash flow or single out anything for that matter?
Cash flow is a sucker's game. People wanting to be rich today look at it. People wanting to be wealthy know better.
I have a unit that cash flows a NEGATIVE $700+ a month. Interested? 99% of the people would run from it just hearing that. Truth is, it's been an awesome investment and continues to get better every year.
22 Replies
- Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes2y
Not knowing your area , price points , cost of living or rents , but $100 or $200 a month cash flow wouldnt be enough for myself . One bad tenant , one sewer line replacement and you will be wiping out any reserves quickly .
Down payment of $13K including reserves sounds pretty low to me . ( Based on Maryland )
- 2yDavid BennettBusiness MemberProperty Manager · Bothell, WA · Member since 2024 · 49 posts · 31 votes
Rene,
To me it really depends on the market you are in. what percentage of the rent and monthly expenses does $100 represent? What is your Annual Rental Rate Increase look like? What is your expected reserve for maintenance and CapEx expenditures?
$100 is very lean, but if this is after budgeted Maint/CapEx, then it might work. Maint/CapEx can be "found" money in the budget at the end of the year, but only if it budgeted. Only having your reserve and the $100 cashflow can be risky. But if your property is in good shape and you have reserves for unexpected issues it might be fine. The appreciation and annual rent increase could give a good IRR with a reasonable holding period.
IMO, I guess it depends on what is your appreciation and turnover strategy.
- Developer · New York City, NY · Member since 2015 · 812 posts · 718 votes2y
No, this is not worth your time for a hundred dollars a month.
If as you say, you're not considering this in a vacuum, then why even single out cash flow or single out anything for that matter?
Cash flow is a sucker's game. People wanting to be rich today look at it. People wanting to be wealthy know better.
I have a unit that cash flows a NEGATIVE $700+ a month. Interested? 99% of the people would run from it just hearing that. Truth is, it's been an awesome investment and continues to get better every year.
- Rental Property Investor · Denver, CO · Member since 2024 · 583 posts · 653 votes2y
Quote from @Matthew Paul:
Not knowing your area , price points , cost of living or rents , but $100 or $200 a month cash flow wouldnt be enough for myself . One bad tenant , one sewer line replacement and you will be wiping out any reserves quickly .
Down payment of $13K including reserves sounds pretty low to me . ( Based on Maryland )
When you think about reserves - do you consider it a multiple of the monthly rent? Or do you just save for capex? My HOA pays for everything related to the structure and my cash flow is $200 after HOA dues so I only tend to keep 2 months of rent in reserves per unit + the tenant deposit
- 2yTheresa HarrisPro MemberMember since 2019 · 15k+ posts · 11k+ votes
I think it really depends on your market and interest rates. With the current interest rates vs the extremely low rates we had for the last decade, combined with higher house prices, cash flow is going to be less than it was 5 years ago. Having said that, rents go up over time and as you mentioned tenants are paying down the mortgage (with more going to principal over time). Also depends on if you have strata/condo fees or HOA.
The cash flow on my places are all over the place and yet I'm fine with all of the rentals for different reasons. Some are in areas that appreciated a long-they usually have lower cash flow. Others are in areas with high cash flow and lower appreciation. The places I bought were all $200K plus (aside from one condo that I just sold-mostly because I was tired of higher turnover), so down payments were a lot more than with your properties.
As long as you have reserves, look at the numbers- $1200-2400 a year cash flow on $13K.
@Rene Hosman I’d be extremely happy with break-even, but I’d also be satisfied with ~$15k/yr.
You're going to get a range of responses and it's not that number that should matter to you, but the background behind it. Principle pay down and appreciation are the main drivers behind my strategy, and I focus more on IRR instead of cash flow.
The market is imbalanced now so it’s tough to get cash flow anywhere. The question you should ask yourself is not just what cash flow you want today, but what do you expect 2, 5 and 10 years down the line. Until you get better clarity on those answers, you are more likely gambling instead of investing.
- Investor · Seattle, WA · Member since 2023 · 87 posts · 44 votes2y
This is market dependent, but, most class B properties are not going to offer cashflow unless purchased outright.
Quote from @Greg M.:
If as you say, you're not considering this in a vacuum, then why even single out cash flow or single out anything for that matter?
Cash flow is a sucker's game. People wanting to be rich today look at it. People wanting to be wealthy know better.
I have a unit that cash flows a NEGATIVE $700+ a month. Interested? 99% of the people would run from it just hearing that. Truth is, it's been an awesome investment and continues to get better every year.
I purchased a property Dec 2021 that using my underwriting was negative $9.5k/month. Tough for anyone to beat that in residential RE (<5 units). Value is currently $700k more than my acquisition and rehab cost and it has some small positive cash flow (~$5k/month). I would say the cash flow would go up every year and that would usually be the case but my son will be moving into one unit probably for just the labor to rehab the last unit (collected rent will go down for a year).
After that rehab is complete, at market rent I would have about $8k/month cash flow with underwriting that most would consider conservative (for example $1200/month allocated to maintenance/cap ex).
The initial cash flow is a beginner’s metric. Look at rent growth if you are primarily interested in cash flow. If you are primarily interested in wealth look at value adds, then market appreciation.
Note I strive to minimize cash flow because it gets taxed versus other RE return are easy to defer or avoid the taxes. So cash flow is my least preferred of the RE return sources.
To answer the OP question, I would be ecstatic in my market in class b or better area if I could purchase break even day1 on cash flow rent ready, or not rent ready where the value added is at least 2x the cost of the value add, at 80% LTV. Both of those are virtually Impossible with mls purchase. Even off market, this would be a very difficult find (if anyone has one in San Diego, I am interested in seeing it, but after BPCon).
Best wishes
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes2y
I'm curious to know how you are calculating cash flow. You said, "I'll have to put in extra of my own money for reserves..." Your reserves should be part of the expense calculation: PITI, maintenance, capex, vacancy, property management, etc. What's left after all that is your cash flow.
Collecting cash flow to spend is an amateur play. Money left over should be placed in reserves until you have an appropriate safety net for your particular portfolio. Once that amount is reached, then continue setting aside cash for the next investment purchase.
How much should you hold in reserve?
This is not an exact science. It depends on your financial strength, the quality of the property, how many properties you own, etc.
I like to start with one significant expense and three months of vacancy. Imagine if you had one single-family home. The tenant fails to pay their last month's rent and leaves the place needing new flooring and paint. It will take two months to turn it around and get it rented. That's three months of mortgage and utilities, the cost of flooring, and the cost of painting. That's a typical scenario and could cost you $10,000 - $15,000 so that would be a good starting point for your reserve.
But there's more!
What if you're a cardiologist with no debt and making $250,000 annually? You could probably afford $20,000 without much impact on your budget. If you're a single mom with student loans, a car payment, and living paycheck-to-paycheck, then $20,000 would be devastating and a reserve is critical.
What if you have an apartment complex with 20 units? Do you save three months of vacancy for each unit and $50,000 for the roof replacement? That would be around $90,000 sitting in a savings account! At this point, I would recommend having a line of credit to cover these things so you don't have money sitting in the bank doing nothing when it could be put to work.
I have 33 units, no debt except for mortgages, and excellent income. I can pay for all my problems using the cash flow from my current rentals. I also have a $175,000 line of credit ready if something catastrophic happens. A reserve is unnecessary, but I still keep around $15,000 - $20,000 in my account.
The point is, that you should sit down and assess your finances to determine what the worst-case scenario may look like, how much you would need to cover it without impacting your life, and whether you will need to build a reserve.
The DIY Landlord Book4.7247 Reviews - Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes2y
There is no way to really get an adequate perspective because there will always be a very wide variance of thought processes. You have some people in here who are cool with and celebrate losing over $1,000 a month. Others wont touch anything lower than $500 in cash flow. I dont believe in ever losing money and lean towards the cash flow model, but recently I walked into a property with maybe $100. I got in for no money in a C plus community so I made a move. All in all it depends on the mindset of the investor and dozens of other things smart people consider. What is the appreciation, condition, community, class level and vacancy rates? Can you add value? Is there decent exit strategies? Can you manage yourself? Again, it would be hard to get any precise direction here but there's enough to think about which way to go with it.
- 2yAlecia LovelessPro MemberMember since 2019 · 3k+ posts · 2k+ votes
@Rene Hosman For that $100/month you’re also getting mortgage pay down and hopefully some appreciation.
If the property was in decent shape to begin with I’d consider $100 per month.
- 2yCliff BennerBusiness MemberAccountant · Denver, CO · Member since 2020 · 394 posts · 183 votes
I think of cashflow in more of the accounting sense, so Cash in vs Cash out, Cash flow is whatever is after that. We leave everything in the business for Real Estate so $500/month is a good number for us, then we can add to our reserves, plan a fix, or save for the down payment on the next one.
Benner Stride52 Reviews I think another factor here in determining whether its a good investment is your age and your goals. If you're younger then it might make a ton of sense to take down anything you can as long as it cash flows. In 20 years, those same houses that you own today will be paid off and worth double what they are now. So if you had 20 of them, you're talking about a huge retirement kicker that you can build.
If you're up there higher in age (i.e. 40's or 50's), then the long play doesn't make as much sense. If it only has 100/mo cash flow, there will be times when you have to dip into your pocket. Not worth it if you have to feed the thing.
But again, what are your personal goals to investing. Growing your portfolio? If so, then sometimes you take some of the lesser deals just to grow. Just like you can't hit homeruns on every deal, sometimes your better off taking some lesser deals in there too just to grow.- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes2y
Quote from @Mike H.:
I think another factor here in determining whether its a good investment is your age and your goals. If you're younger then it might make a ton of sense to take down anything you can as long as it cash flows. In 20 years, those same houses that you own today will be paid off and worth double what they are now. So if you had 20 of them, you're talking about a huge retirement kicker that you can build.
If you're up there higher in age (i.e. 40's or 50's), then the long play doesn't make as much sense. If it only has 100/mo cash flow, there will be times when you have to dip into your pocket. Not worth it if you have to feed the thing.
But again, what are your personal goals to investing. Growing your portfolio? If so, then sometimes you take some of the lesser deals just to grow. Just like you can't hit homeruns on every deal, sometimes your better off taking some lesser deals in there too just to grow.Awesome words of wisdom from Mike as usual (I'm glad you're back!).
There's no real right answer. It's going to vary depending on your own income outside of investments, your age, your ultimate goals, whether you want/need the income to live off of, and all kinds of other considerations. The older you get the less attractive appreciation is unless the goal is to leave some kind of legacy.
Personally, I'm not interested in owning anything that doesn't cash flow at least $500 per month because there's just too many things that can go wrong in REI and I want the properties to earn their keep both in appreciation and in cash flow. Back before I retired, I didn't need any of the cash flow at all so all profit just rolled back into more properties. Now that I'm retired I "eat" some of the profits, but because I did this for so long while I was working my total leverage is about 25-30% with a bunch of properties free and clear. At my point in life everything I own is both a cash flow superstar and appreciating nicely, because I'm invested in growing, popular areas.
If I was just starting off now, I'd probably be aiming for value-add in good areas where I could either live there while improving the unit(s) - ie a duplex, triplex - or where I could trade sweat equity for profit, or both. It would be pretty hard to buy $500+ per month cash flow unless you were buying in some rough neighborhoods.
Skyline Properties - Lender · 92703 · Member since 2022 · 326 posts · 538 votes2y
Hello Rene,
Congratulations at least your not negative. Depending on the market your investing in you'll be lucky to break even or cash flow 100 like yourself. Even by looking at the bigger picture if you will be holding the rental long term to get some of the appreciation over time and its not affecting your income negatively then it may be smart to continue. But if your looking to cash flow like $500 or more per month you might want to look into more cost effective markets where you can purchase a property very cheap and the rents will give you that type of cash flow your looking for. You just need to ask yourself what is it that you are looking for now? Huge cash out in the future from appreciation or active income from rentals now?
- 2yCoty B LunnBusiness MemberReal Estate Agent · Binghamton, NY · Member since 2022 · 45 posts · 26 votes
Hi Rene,
I typically focus on cap rates rather than just cash flow numbers when evaluating properties. A quick rule of thumb I use is that I aim for a minimum profit of $1,000 per month for every $100,000 invested. This is after factoring in all expenses, including taxes, insurance, vacancy, management fees, maintenance, and utilities (gas, electric, water, sewer, and garbage).
Regarding cap rates, I typically target between 15-18% as a minimum for a deal to make sense. Keep in mind, I’m based in the Binghamton, NY area, which is more of a cash flow market with slower appreciation compared to other areas. While our home prices do tend to rise, the growth is generally at a more gradual pace. Hope this helps!
SVN Innovative Coty Lunn4.820 Reviews - 1yJonathan SmallPro MemberInvestor · Suwanee, GA · Member since 2020 · 182 posts · 151 votes
Cash flow goals depend on your investment strategy! Here's a breakdown:
- Conservative: 8-10% after covering all expenses (mortgage, taxes, insurance, property management). Focuses on stable, long-term returns.
- Moderate: 10-12% after expenses. Aims for a balance between cash flow and potential appreciation. @Matthew Paul it seems you recommend at least a 10% ROI.
- Aggressive: 12%+ after expenses. Prioritizes maximizing cash flow, potentially with higher risk or management intensity.
Remember, cash flow isn't the only factor! Consider factors like appreciation potential, vacancy rates, and your overall investment goals. @Calvin Thomas would you do $100 cashflow if it was a high appreciation low vacancy market?
What's your investment strategy (conservative, moderate, aggressive)? What other factors are you considering besides cash flow? Sharing your goals can help others provide more specific advice! @JD Martin makes a good point to consider your W2 income and your age. The older I get the more cashflow I want and not willing to wait for appreciation.
@Greg M.how did you get financing on a deal that is losing $700+ a month? Is there something you can do to get to cashflow positive sooner than later?
Reserves are key as @Theresa Harris has pointed out. @Nathan Gesner pointed out my situation. I stack cashflow for capex and repairs because I have a decent W2 job that I live off of. Just like @Mark Cruse stated I don't want to loose money every month on any investment. I lean towards cashflowing deals.
- Developer · New York City, NY · Member since 2015 · 812 posts · 718 votes1y
Quote from @Jonathan Small:
Cash flow goals depend on your investment strategy! Here's a breakdown:
- Conservative: 8-10% after covering all expenses (mortgage, taxes, insurance, property management). Focuses on stable, long-term returns.
- Moderate: 10-12% after expenses. Aims for a balance between cash flow and potential appreciation. @Matthew Paul it seems you recommend at least a 10% ROI.
- Aggressive: 12%+ after expenses. Prioritizes maximizing cash flow, potentially with higher risk or management intensity.
Remember, cash flow isn't the only factor! Consider factors like appreciation potential, vacancy rates, and your overall investment goals. @Calvin Thomas would you do $100 cashflow if it was a high appreciation low vacancy market?
What's your investment strategy (conservative, moderate, aggressive)? What other factors are you considering besides cash flow? Sharing your goals can help others provide more specific advice! @JD Martin makes a good point to consider your W2 income and your age. The older I get the more cashflow I want and not willing to wait for appreciation.
@Greg M.how did you get financing on a deal that is losing $700+ a month? Is there something you can do to get to cashflow positive sooner than later?
Reserves are key as @Theresa Harris has pointed out. @Nathan Gesner pointed out my situation. I stack cashflow for capex and repairs because I have a decent W2 job that I live off of. Just like @Mark Cruse stated I don't want to loose money every month on any investment. I lean towards cashflowing deals.
No. $100 a door doesn't help cover the unexpected repairs. In 2024, we've had to replace, in a few buildings:
Siding - $30k
Roof - $8k
Leaks - $3k
Turn-Overs - $20k+
Appliances - $5k
Now, I've been doing this for over 40 years, so I have a good amount of buildings. We keep significant amounts of reserves in treasuries for these reasons. That said, we don't have a door that earns less than $600 a month. We only do mixed-use and multi-family.
A $100 a month per door isn't worth my time. Our buildings are in high growth markets in New York, New Jersey, Connecticut, Massachusetts and Pennsylvania. Any investor would get killed by earning $100 a month per door in these areas.
Quote from @Jonathan Small:
@Greg M.how did you get financing on a deal that is losing $700+ a month? Is there something you can do to get to cashflow positive sooner than later?
Same way you get financing on all deals. Show the bank you can afford it. Negative $700/month doesn't put a dent into our household free cash flow and that allows us to buy properties that appreciate rather than cash flow.
I also prefer appreciation instead of cash flow. Every $1 I make in cash flow, the government will take 35¢-40¢ today. Appreciation allows me to push that off for years. Negative cash flow also can offset positive on other units to reduce taxes today.
- 1yCoty B LunnBusiness MemberReal Estate Agent · Binghamton, NY · Member since 2022 · 45 posts · 26 votes
As a general rule, I aim to achieve a net return of $800–$1,000+ per month for every $100,000 invested. This is calculated after accounting for all expenses, including taxes, insurance, utilities (water, sewer, garbage, electric, gas), and an allowance for maintenance costs (typically 5% of gross rent, adjustable based on the building's condition), as well as management fees.
I invest in the Binghamton, NY area both as an investor and as a realtor. Binghamton was recently recognized as one of the fastest-rising markets for local home prices. This market now offers not only excellent cash flow but also strong appreciation, creating well-rounded investment opportunities.
The 60 strongest housing markets heading into 2025 - Fast CompanySVN Innovative Coty Lunn4.820 Reviews
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