What is a a good "rule of thumb" profit margin to shoot for?

11 Replies

What is a a good "rule of thumb" profit margin to shoot for when renting? If your out of pocket expenses are $1000, would $1500 per month rent be an average or above average. $500 per month profit. 

I guess cash flow per month. The scenario that I used was pretty close to what my situation is. I am interested in a Tri-plex with all three units currently rented at about $1600 per month total( A little over $500 per unit, per month). Mortgage payment with taxes and insurance are estimated at around $1000. I believe it to be a good investment, but wanted to know what the professionals thought of it.

If I can't make at least 10% annual cash on cash return I won't purchase. So if I was buying a property for $100k cash, I need to make a minimum of $10k annual return after all expenses. Less than that I would probably just sink money into my vanguard funds. 

You’re leaving out a lot of other costs. Vacancy, repairs, management fees (although you could self manage), any utilities you may required to pay (water/sewer, garbage, common area electricity), etc. Without knowing all of that info, it’s hard to say whether it’s a good deal or not. However, it seems as though the $500 isn’t going to cover all those expenses.

I’m relatively new but I would suggest plugging in your numbers to the rental properties calculator on this site. It only takes a few minutes and you can see what your cash on cash return is and your cash flow. 

I would also try to keep that cash on cash return higher than 10% like JD Martin suggested.