What is the minimum cash flow per door per month you use?

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What is the minimum cash flow per door per month you use?

Megan Kline
Pottstown, PA · Member since 2017 · 1 post · 10 votes

I am just starting to acquire rental property and curious what others consider the minimum cash flow requirements for deal analysis. Per month and per unit, after expenses and debt service.  Also, self manage or pay property management?

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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
7y
Originally posted by @Frank Wong:
Originally posted by @Mark Fries:
@Megan Kline

400-500 per door per month...

150-200 isnt worth my time

 Exactly Mark!  That is the minimum I want to make per door.   $200 for the risk, dealing with the tenants, loan, repairs, and time.  Not worth it in my opinion.  I would rather focus on increasing my personal income than spend the time for that amount.  Just run the numbers and do the math.

All depends.  My first rental was $200 free cash flow on that.  Today, almost a decade later, that same rental has free cash flow of $1600 a month, has gone up in value $170,000 from purchase (It went down for the first 2 years), and Id have to check my mortgage statement, but probably paid down the note on it by $50-$75k in that time.

I'll take zero on one asset, and others Id want $1,000. Every property is different, everyone's goals are different. Everyone's strategy is different.

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  • Spencer Cornelia
    Investor · Las Vegas, NV · Member since 2017 · 321 posts · 524 votes
    7y

    Pay property management.  I have a w2 so I have no interest in managing (nor do I have the bandwidth).  My minimum is $0 per month.  My 4plex is a break even property but I bought using seller financing with only $20k (~8%) down and with built in equity.  I'm not reliant on real estate to pay my bills so I can afford a break even buy and hold if it makes sense.

    If I were to buy a property in the midwest that was a straight buy and hold, which I may be looking for in q3 2019, I'd want to see at least a 8% cash on cash return if no appreciation were reasonably expected.

    11Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    7y

    200$ a door

    25Reply
  • Robert Biggerstaff
    Contractor · Pensacola, FL · Member since 2018 · 303 posts · 240 votes
    7y
    Originally posted by @Dennis M.:

    200$ a door

     I am like Dennis generally speaking if the property cost me less than 60,000 I need to be at least at $200 a door net profit. I take out for taxes, a takeout for the water heaters, I take out for roof, take out for central heat and air,… These are all your capital expenditures. Make sure that you figure them in to your monthly operating expenses. I do not advise having a breakeven property at all. I would not recommend buying for appreciation either.  

    14Reply
  • Mark Fries
    Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes
    7y
    @Megan Kline 400-500 per door per month... 150-200 isnt worth my time
    24Reply
  • Kevin Sobilo
    Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
    7y

    I don't think there is a good or simple answer to this question in general.

    In some areas it isn't feasible to invest for cash-flow. So, a break even property gives you tax benefits like depreciation, building equity, and perhaps some appreciation.

    In other areas it is easy to find a cash flowing deal, even then how much it cash flows is highly dependent on the investors goals. For someone working a w-2 job and not living on the cash flow, they might choose short term financing with higher payments and have LESS cash flow month to month than someone who needs to live off the cash flow.

    So, I think the answer can and should be different for different investors based on their goals, investment strategy, market they invest in, etc.

    38Reply
  • James R.
    Winter Garden, FL · Member since 2018 · 63 posts · 145 votes
    7y

    There are a lot of factors that can affect cash flow per door. The minimum the rest of us use really doesn't matter. What you need to figure out is what's the minimum per door you need to make it worth your time/effort. 

    To answer your question though. I need a minimum of $150 per door and 15% CoC or greater. I run my calculations as if I'm paying a property manager but I manage the properties myself and pay myself that fee.

    21Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    7y

    I'm trying for $150 a door but every deal needs to be evaluated on its own merits.

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    4Reply
  • Matthew Paul
    Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    7y

    I shoot for $400 plus .  Anything less isnt worth it 

    7Reply
  • Martin NealPro Member
    Rental Property Investor · Chicago, IL · Member since 2017 · 293 posts · 383 votes
    7y

    I shoot for a minimum of $220 but depending on all factors of the deal, I will take as low as $150 a door. My CoC return can't be less than 17%.

    4Reply
  • Mark Fries
    Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes
    7y
    @Matthew Paul I agree 100%. Seems like once a week some kind of post pops up asking this cashflow question and the majority of the responders seem to think that 150 or 200 a month is good... I just cannot wrap my head around how that could possibly even resemble being good or acceptable? I think people need to have bigger aspirations or higher goals or something... Just because the majority of people say that it's good it seems like everybody else just believes it and assumes it must be good...like playing follow the leader..200 a month is 2400 a year...that's nothing...one thing breaks and you're done...
    38Reply
  • Robert Leonard
    Rental Property Investor · Greater Boston Area · Member since 2018 · 258 posts · 105 votes
    7y

    @Megan Kline given where I believe we are in the cycle, I shoot for a minimum of $250-$300 per door, for properties I manage myself. However, the CoCROI must also be strong, above 20%.

    Robert Leonard

    1Reply
  • Matthew Paul
    Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    7y

    @Mark Fries You are so right .  If all I was clearing was $200 a door , I would sell .  I do contracting , I can hang some shelves in a customers garage and make that in a hour and a half . 

    7Reply
  • Mark Fries
    Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes
    7y
    @Matthew Paul Correct... If my option was staying at home and earning nothing on my money or investing it in real estate and making $200 a door I would just stay home...
    4Reply
  • Pakpong Malingam
    Member since 2018 · 1 post · 1 vote
    7y

    @Mark Fries

    You are right to set the goal higher than anyone.

    1Reply
  • Frank Wong
    Real Estate Broker · Bay Area · Member since 2018 · 1k+ posts · 3k+ votes
    7y
    Originally posted by @Mark Fries:
    @Megan Kline

    400-500 per door per month...

    150-200 isnt worth my time

     Exactly Mark!  That is the minimum I want to make per door.   $200 for the risk, dealing with the tenants, loan, repairs, and time.  Not worth it in my opinion.  I would rather focus on increasing my personal income than spend the time for that amount.  Just run the numbers and do the math.

    5Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    7y
    Originally posted by @Frank Wong:
    Originally posted by @Mark Fries:
    @Megan Kline

    400-500 per door per month...

    150-200 isnt worth my time

     Exactly Mark!  That is the minimum I want to make per door.   $200 for the risk, dealing with the tenants, loan, repairs, and time.  Not worth it in my opinion.  I would rather focus on increasing my personal income than spend the time for that amount.  Just run the numbers and do the math.

    All depends.  My first rental was $200 free cash flow on that.  Today, almost a decade later, that same rental has free cash flow of $1600 a month, has gone up in value $170,000 from purchase (It went down for the first 2 years), and Id have to check my mortgage statement, but probably paid down the note on it by $50-$75k in that time.

    I'll take zero on one asset, and others Id want $1,000. Every property is different, everyone's goals are different. Everyone's strategy is different.

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group545 Reviews
    WebsiteView Page
    53Reply
  • Frank Wong
    Real Estate Broker · Bay Area · Member since 2018 · 1k+ posts · 3k+ votes
    7y
    Originally posted by @Russell Brazil:
    Originally posted by @Frank Wong:
    Originally posted by @Mark Fries:
    @Megan Kline

    400-500 per door per month...

    150-200 isnt worth my time

     Exactly Mark!  That is the minimum I want to make per door.   $200 for the risk, dealing with the tenants, loan, repairs, and time.  Not worth it in my opinion.  I would rather focus on increasing my personal income than spend the time for that amount.  Just run the numbers and do the math.

    All depends.  My first rental was $200 free cash flow on that.  Today, almost a decade later, that same rental has free cash flow of $1600 a month, has gone up in value $170,000 from purchase (It went down for the first 2 years), and Id have to check my mortgage statement, but probably paid down the note on it by $50-$75k in that time.

    I'll take zero on one asset, and others Id want $1,000. Every property is different, everyone's goals are different. Everyone's strategy is different.

     Hi Russell,

    I agree.  Other factors need to be considered.  8yrs ago I would be happy getting $200 a door.  It was a different market different price point and risk.  I also had a lot more time.   As time goes by an investor's goal changes. 

    7Reply
  • Matthew Paul
    Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    7y

    @Russell Brazil My first house was something very similar to yours .

    What others dont realize sometimes are markets are vastly different . Russell and I are in close proximity the Maryland ,DC, VA area , his area is a bit more expensive . We dont get $50K houses , hell you cant get a $50K building lot . Unless you are in a class d area .

    I buy for location and cash flow . Every deal I have gotten are older homes in B locations . All have been work of mouth and 50% of market . I go in all cash , as is and settle quick . I refinance a bit but not near full value . My cash flow replenishes my buy fund yearly . My biggest value in the properties is the land . 3 properties are subdivided and when I get bored I will build . Deals are tight , very tight .  Just 1 block from me , a similar neighborhood , a rancher sold for $450,000 it was listed for $410,000 . Nice house , but nothing special . Homeowner bought it to tear it down and build new . 

    Basically anything under $200K is a steal , you better be first , cash , as is , and quick . 

    I cash flow well because I keep leverage minimal , but my value is the land underneath the house . 

    7Reply
  • Arnold B. Guerrero
    Rental Property Investor · Sacramento, CA · Member since 2018 · 27 posts · 8 votes
    7y

    @Mark Fries hey Mark, is that for “C” class area for that return or higher end property?

    0Reply
  • Mark Fries
    Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes
    7y
    @Arnold B. Guerrero I am actually trying to get away from this "classification" of different types of residential real estate...A, B, C, D, E, F, G.....means nothing to me... If I buy a residential rental property I want at least 4 or $500 a month...regardless of classification.
    4Reply
  • Arnold B. Guerrero
    Rental Property Investor · Sacramento, CA · Member since 2018 · 27 posts · 8 votes
    7y

    Gotcha,

    I just wanted to get an idea if it was high end property, middle class, or lower end. I found that the lower end properties have a higher return. Just wanted to see it that was the case for you. 

    Thank you. 

    3Reply
  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    7y

    @Megan Kline My minimum is $200 per door with all expenses taken into account.

    3Reply
  • Aaron Hunt
    All Over, USA · Member since 2017 · 689 posts · 756 votes
    7y

    Net even works for me. W2 is high. Okay with write offs.

    Appreciation on Class A (or at worse Class B) or bust.

    3Reply
  • Richard Borashan
    Rental Property Investor · New York, NY · Member since 2018 · 15 posts · 15 votes
    7y

    @Megan Kline I would say it’s very market dependent. If you’re investing on the coast then $200/door seems like a waste of time, but maybe in the Midwest $200/door is a win.

    The best thing to do is just run the numbers for the market you're investing in and see if there's a difference in cash flow between the different comps you're running into. If every property you calculate nets you between $2-300/door on a SFR, then see if those numbers work for you.

    I feel like asking in general terms is like asking what kind of salary is acceptable - you’ll get a different answer from somebody who works in NYC compared to the Midwest etc.

    6Reply
  • Lauren C.Pro Member
    Rental Property Investor · Hamilton Township, NJ · Member since 2012 · 211 posts · 149 votes
    7y
    Originally posted by @Mark Fries:
    @Matthew Paul

    Correct... If my option was staying at home and earning nothing on my money or investing it in real estate and making $200 a door I would just stay home...

    I think it also depends what definition people are using for cashflow.  The money left over after deducting expenses from income, OR the amount left over after deducting expenses from income AND setting aside 30% for capex/vacancy/repair/PM.

    $200/door after all expenses AND reserves is a decent deal in my book. 

    On another note though, I think people should focus more on COC rather than cash per door but that's whole different thread.

    12Reply
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