Whats your Cashflow Rule?

[David Zheng]

Hi all,

Just had a quick question on what everyone uses as a rule of thumb for rental cashflow?

just to make it simple... I'm talking about financed (20-25% down) 2-3 bedroom houses/condos that are in the 100-150k Range

What kind of cashflow after mortgage, interest, insurance, HOA fees, vacancy, repairs, etc etc. are you looking at per month?

$100 a door? $100 a person?

I know @Brandon Turner wants $100 a door, but after doing a lot of online browsing I see a lot of people requiring and being successful at hitting $500 a door on 100k houses.

Just taking a poll to see where I want to place myself

Thanks! 

[Jacob Pereira]

I have to disagree with most of the people posting here so far. Benchmarking is a useful metric to see whether your assets are performing, and comparing your numbers to those of others is a good way to see whether your money would be better invested elsewhere. It's true that individual circumstances vary, and to do a full analysis you should include things such as appreciation, tax benefits, self-labor costs, etc. but I do have a quick rule of thumb to use as a first step:

The stock market historically appreciates over time at around 7% annually. So if I can't get a cash-on-cash return of a MINIMUM of 9% (the extra 2% for the extra effort vs just buying an ETF), I know that it's not worth my time to do a deeper analysis, barring unusual circumstances. And I know people will argue that the power of leverage, inflation, mortgage paydown, tax benefits, etc. make it still worthwhile, but for me there's too much work/uncertainty in RE to bank on those secondary income metrics.