What would you think of this property manager?

[Mark Fitzpatrick]

I once had a property manager (we no longer use him) who had been a real estate investor (he owned quite a few properties, but was a bit of a slumlord) and property manager for many years. He once told me that if I wanted more cash flow on future properties, I just needed to put down a larger down payment. He said "you can make anything cash flow with a large enough down payment". What would you say to this guy?

[J Scott]

He's right...with a big enough down payment, most things will cash flow at market rents...

That said, cash flow is just one metric to be used when evaluating a deal, and used alone is pretty meaningless.

For example, if I said to you, "Would you rather have $1000 per year in cash flow or $10,000 per year in cash flow on a particular property, which would you choose?"

What if you had to invest $2000 to get that $1000? And what if you had to invest $100,000 to get that $10,000? Would you still want the $10,000 per year over the $1000? Probably not.

Good investors use many different metrics to evaluate their deals, including cash flow, ROI, cash-on-cash return, IRR, total return, etc. And without looking at multiple metrics, you can't get the full picture.