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

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

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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

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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Brandon Frulla
Real Estate Agent · Omaha, NE · Member since 2018 · 83 posts · 51 votes
7y
Originally posted by @Mark Fries:
@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.
What % down do you usually do? Thanks in advance
0 Reply
William Hardie
Rental Property Investor · Madison, AL · Member since 2018 · 10 posts · 3 votes
7y
@Mark Fries I am also a newbie to the idea of real estate investing, so I was wondering if the $400-500 cashflow you were talking about accounts for repairs and Capex? There was a part at the end of this post where you mentioned something breaking and there goes the $200. As I am learning to do the rental analysis, I am allotting somewhere around 10% of monthly rental income for each repairs and Capex.
1 Reply
Ned J.Pro Member
Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes
7y
So for all the guys that are routinely getting $400-500 per door in cash flow....AFTER you factor in all you allowances for CapEx, short term repairs, PM, insurance etc etc etc...... good for you..... that's pretty impressive. Not a chance in hell that will ever happen on a routine basis in CA.
When this discussion comes up, its important to reference what you are using as your "cash flow" number.....its needs to be AFTER you take out % for ALL you expenses. I see and talk to a lot of people (and I used to be one of them) that thought the rent was $1500.....and the mortgage is $1000 each month, then my cash flow is $500...not even close. And some of the statements above indicted people still think that way....yeah if I'm only making $2400/year and something goes wrong, I'm screwed..... my "cash flow" just disappeared for a couple of years..
But not if that $2400/year is really pure profit even after I have already budgeted and accounted for putting a new HVAC or roof or whatever into the unit. So in reality I'm putting $10k into my account every year and years later I spent 10k on a roof or 5k on an HVAC....so I'm making $2400 even in the years that I had to do a roof, and a hell of a lot more each year on all those years I didn't.
So just be careful on how people throw the "cash flow" number around and make sure you are comparing apple to apples
Most of the people on here throw around $200/month per door as their rough goal....AFTER they account for ALL their short term and long term expenses...so pure profit after everything is accounted for.
If you guys are getting $400-500/month per door on a regular basis, then my hat is off to you....
30 Reply
Scott Anderson
Rental Property Investor · AZ · Member since 2018 · 212 posts · 183 votes
7y
@Megan Kline
In my area I’m shooting for $-50/month with capex vac maint. Within 1 year its break even.
within 3 it’ll be $200 and even quicker if I pay off the heloc with personal funds.
Even that is proving impossible. But I'm 100% financed with a heloc doing SFH.
0 Reply
Alexander V.
United States · Member since 2019 · 52 posts · 76 votes
7y
It seems very odd to me to try to judge whether an investment deal is good or not based on $/door without knowing how much cash was initially invested. $'s are for W-2s, %'s are for investments. Whether or not $500/door is "good" depends on the number of doors, how much the property costed, how much the projected appreciation is, etc. Am I wrong in saying that? It's like saying "my fund pays an annual dividend of $2 per share, is that good?" Any answer is meaningless without knowing the cost per share and at least some basic fundamentals.
20 Reply
Michael T.
Los Angeles, CA · Member since 2018 · 326 posts · 279 votes
7y
@Megan Kline this is truly a question that depends on markets, the rental and the opportunity for appreciation.
In my opinion you are starting out so you may be okay with a little lower amount of $150 - $200 a door but this also depends on the market your in and what your total investment in the property is.
@Martin Neal mentions his CoC return cannot be less than 17% which is a good factor to look at not just dollar amount per door.
My Internal Rate of Return is typically in the 17% range and my CoC is well above 20% and I try to get at least $350-$400 per door.
I have a few that don't cash flow right now but the appreciation on them has been great and we've refinanced a few times and sold a few to get a strong profit.
Also, if you want a second job do the property management yourself otherwise hire a good property management company. If the rental is in your backyard you can try it out for yourself to learn and if it goes well, that's great!
2 Reply
Sam Hopkins
OH (ohio) · Member since 2016 · 63 posts · 43 votes
7y
@Megan Kline I aim for 6% return on the money I invested, whether or not there is cash flow. Too many people worry about cash flow. If you are able to put $1,000 a month into a savings account, then you can take that same $1,000 and get $2,000 in equity, or 50% return on your money.
1 Reply
Jonathan Alden
San Francisco, CA · Member since 2018 · 2 posts · 1 vote
7y
@James R. @Martin Neal

What areas of the country do you both invest in and how much are you typically buying homes for? 15% CoC seems very high to me. I'm in California and just purchased my first property in PHX. I have a traditional investments background and work in institutional investments currently (RE is not my full time job but i'm looking to ramp that up).
On the west coast - without fixing and flipping off market properties it seems 6-8% is very good. I realize that 15% deals are out there, but curious how you think about acquiring properties.
0 Reply
James R.
Winter Garden, FL · Member since 2018 · 63 posts · 145 votes
7y
@Jonathan Alden I buy in the Central Florida area and target properties I can BRRRR. My current rehab will be roughly 34% CoC after refi. My best so far is a little over 600% CoC. I haven't landed one of those infinite CoC yet; perhaps I need to make that one a goal for this year.
I look for property in can be all in for under $150k (purchase+rehab).
1 Reply
Griselle Monzon
Property Manager · Orlando, FL · Member since 2018 · 15 posts · 4 votes
7y
@Mark Fries Do you invest in sigle family or multifamily? How many doors minimum?
0 Reply
Eric L.
Rental Property Investor · Royersford, PA · Member since 2018 · 25 posts · 19 votes
7y
@Megan Kline, I'm a newer, part time investor in your area. I didn't find any cash flowing deals on the MLS throughout 2018. With our higher taxes, I'm satisfied with a $200 mo cashflow. I think you can find better cashflowing homes in Pottstown and Norristown, but you know what these areas are like.
I prefer to manage my properties for now, but I will eventually turn them over to a management company at some point in the future. I do include this cost in my evaluations.
0 Reply
Martin NealPro Member
Rental Property Investor · Chicago, IL · Member since 2017 · 293 posts · 383 votes
7y
@Jonathan Alden I’m investing in Chicago, in particular on the south side where the Obama Library area is coming to. I was born and raised on the south side so I know the areas well. Keep in mind that all markets are unique and have different values. California is a expensive market but if you go to a place like Memphis, the value of real estate is priced different significantly.
2 Reply
Jonathan Alden
San Francisco, CA · Member since 2018 · 2 posts · 1 vote
7y
@James R.
@Martin Neal
Thanks for the info. Makes sense with BRRR deals especially. I just purchased a property in Phoenix I found through a broker/investor contact. However, it is a new rehab and doesn't need any work. I'm currently trying to narrow down cities i'd like to invest in before building a team. I appreciate the response
1 Reply
Jennifer Joseph
Rental Property Investor · Akron, OH · Member since 2017 · 22 posts · 12 votes
7y
For me it depends on how much cash I have in the deal. So, for $30 -$40K in the deal I need to cash flow at least $400. But, if I have only $15K or so in the deal then I'm okay with $200. Cash flow is important to me as my goal is to quit my W2. I also live in the Midwest so I am not counting on appreciation. This is after all expenses and 20% for vacancy and repairs.
1 Reply
Mike Lauer
Investor · Milwaukee, WI · Member since 2017 · 44 posts · 69 votes
7y
For me it's all about cash-on-cash ROI. If a property is cash-flowing $100/month but I have $0 invested, I'll take that. I like to see at least 15% cash-on-cash ROI.
4 Reply
Xavier Vital
Rental Property Investor · Tampa FL · Member since 2019 · 4 posts · 4 votes
7y
@Mark Fries for people like me with a W2 cashflow is not what's making us pay our bills. Appreciation and write offs in my tax return are more important than the few thousand dollars that I'll get from the cashflow. I'm using it to cover unexpected issues and expenses. Just sold a duplex in NJ that was rented for two years. Appreciated from 380k to 460k in 2 years. In such case I don't mind a 200$ cashflow.
2 Reply
Chris Virgil-Stone
Rental Property Investor · Cape Coral, FL · Member since 2015 · 206 posts · 83 votes
7y
@Mark Fries - from reading some of your posts prior, you typically don't use leverage right? So you're $/door should be higher than someone who uses leverage (assuming all other factors are equal).
I get $4-500 for those I bought at the right time, self manage and require very little maintenance. I also spend very little time managing them so, I would consider $200 / door but that is ideally my minimum.
$ / door should only be considered when managing the property would consumes too much time for the money, the monthly income isn't material or if it comes at an opportunity cost ( your money could make a higher return somewhere else). Your cash on cash should take precedence ie. If you were able to structure a no cash out of pocket deal, passing on $150 or $200/ door is crazy (unless the market and deal include too much volatility).
5 Reply
CJ Hamlin
Developer · FL · Member since 2018 · 26 posts · 16 votes
7y
@Megan Kline I see more and more retired investors feeling "ok" with $100-200 per door CF. It's likely they feel this is safer (or possibly better) than stock or mutual fund investments. Not saying this is good or bad...just an observation. If you are driven enough --> find great deals and maximize your CF.
Overall, I think you should analyze a variety of factors that align with your investing mission to ensure your goals are being met...rather than a superficial number like "per door CF." ...but if you had to pin it down: $285+ is a good target.
0 Reply
Dustin Hood
Rental Property Investor · Nederland, TX · Member since 2017 · 44 posts · 30 votes
7y
@Mark Fries I’ve seen you post several times about $400-500 cash flow. I think that’s amazing if you’re getting that, but I think you’re in the minority. IF you’re financing these deals with 20-30% down, you must be getting your properties dirt cheap, OR your rent are amazingly high to get that cash flow.
I’d have to say your properties are more than the 2% rule and getting like 3-4% rent to purchase price.
Can you give me an example of a property you bought cash flowing $500/month with a mortgage and expenses?
Id assume these aren’t multi family since $500/door is unheard of with multifamily.
2 Reply
Adam Wallen
Rental Property Investor · Grand Rapids, MI · Member since 2018 · 46 posts · 10 votes
7y
So apparently everyone has a different idea on what is an acceptable cashflow, I'm seeing anywhere from $100-500+ per door in this thread. Here is my question... Don't the responses drastically depend on each investors situation, or perhaps length of time in the REI business? I guess what I'm getting at is, if acquiring your first rental property where you can't put a significant % down on the property, but can still cash flow something like $200/mo and have ~20% equity in the property up front, wouldn't everyone consider that a good starting point?
It seems like where you are at in your REI career plays a huge role in whether a property makes sense to add to your portfolio.
3 Reply
Brian Ploszay
Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
7y
$200 per door is too little. I have a lot of single family rentals, and they are more expensive to operate. In my portfolio, the profits actually has some variances mainly due to repairs.
2 Reply
Sachin Bhat
Rental Property Investor · Lancaster, CA · Member since 2016 · 68 posts · 26 votes
7y
When you are starting out you probably settle for less of cash flow. Because you might not be in a position to pay cash for the property or put a large amount of down payment. That's the only way you will be able to have a large net positive cash flow per month. If you are using hard money lender or even conventional lender but don't put large down payment then you have to settle for lesser cash-flow. Once you accumulate some cash through equity build up then you will be able to purchase property with better cash flow since you can use that equity money to put down on your next investment property. But it will take some time. Its like a snow ball effect.
3 Reply
Sen A.
Rental Property Investor · Union City, NJ · Member since 2018 · 40 posts · 66 votes
7y
In today's market, if you find anything that cash flows $400+ per door after PITI/maintenance/capex/PM/utilities, then you've bought yourself a D class property.
2 Reply
Account Closed
Hayward, CA · Member since 2017 · 48 posts · 55 votes
7y
I'll happily break even and even go slightly negative if the property has solid construction and room for long term improvement.
This would be after PITI, utilities, and 19% for vacancy/repairs/capex. I mostly buy fully leveraged with no money in.
0 Reply
Junior Soares
Contractor · San Jose, CA · Member since 2018 · 262 posts · 407 votes
7y
@Megan Kline It's really tough to sit here and give you a per door number because there are alot of factors to consider. Someone can say 200 per door but what does that mean? You dump 60k of your own money into the purchase and upgrades and you get 200 per door after all expenses? Then that's a not so good of a deal because it would equate to 4% return on your money. The right question to ask is what is the ROI you look for when looking at a deal. For me personally, I look for 10 points on all of my investments. When I analyze a property for example and factor in all expenses, capx, maintenance, property management, taxes, insurance, mortgage etc if that end number isnt at least 10% COC I dont persue the deal because if it shows 10% on paper the actual look more like 8-9% because stuff always happens and I'm very content with those returns. Then there are those investors who dont care for cash flow and persue appreciation properties. Best of luck, Junior
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