What's your cash flow goal?
Michael BaradellBusiness Member
Property Manager · New Orleans, LA · Member since 2013 · 184 posts · 34 votesHey BP!
After all expenses are subtracted, what's it the minimum cash flow you shoot for on a single family home?
My short-term goal is to have a minimum of 48 properties in 3 years @ $200 per month = $9,600 per month passive income. My ultimate goal is 100 properties @$200 = $20,000 per month of passive income.
What are your Multi-family cash flow targets?
@Michael Baradell
About $150-$200/month after everything...and I mean EVERYTHING
Vacancy, Insurance, Management, Taxes, Maintenance &Cap Ex, and principal and interest.
Most single families don’t meet that criteria!
My short-term goal is to have a minimum of 48 properties in 3 years @ $200 per month = $9,600 per month passive income. My ultimate goal is 100 properties @$200 = $20,000 per month of passive income.
My short-term goal is to have a minimum of 48 properties in 3 years @ $200 per month = $9,600 per month passive income. My ultimate goal is 100 properties @$200 = $20,000 per month of passive income.
That's very aggressive in that timeframe. How many do you have now?
You can shoot for whatever you want but you will never know what your cash flow is until the day you sell. till then it is nothing more than a guestimate based on the uncertainty of the business.
SFHs generally have very low cash flow. Mostly an appreciation game.
Please elaborate more. How can you not know your own cashflow you have? Not sure what you mean by generally low cashflow. Some are low and many are high. It depends on several factors.
Hey BP!
After all expenses are subtracted, what's it the minimum cash flow you shoot for on a single family home?
$500, if I can't hit my target I don't buy.
$1500 - $2500....but when I wake up and come to reality, $150 and up.
@Michael Baradell in general, $100/min for every 10K after all expenses.
250-300/door after taking into account everything
@Michael Baradell this is kind of a weighted question. Some people say $100 per door and others will say $500 per door. It’s possible to get even high $ per door but I think those times have passed as many markets are overpriced. You have to consider how much you are willing to use for a down payment with all expenses included. If your goal is $250 per door a 20% down payment may not be enough to get that amount and you may need a 30% DP or 35%.
@Thomas S. and I typically don't agree on much, but he's making an extremely valid point here that isn't talked about frequently enough in the forums -- you never really know on cashflow until you're completely done with a property. In our self-managed business with C/D-class borderline properties, our biggest expenses are HVAC-related, roof-related, and turnover-related. It's really hard to be sure what a property will cost you or make you until you're done with it.
Here's an example with simplified parameters.
1. Assume you buy two D'class properties in year 1 for $30K each, rent for $600/monthly each, total property taxes $119/monthly, monthly debt payment $320/monthly each on a 20-year commercial loan. Cash flow after taxes but before operating expenses = $201/month.
2. Assume both furnaces are shot when you buy. Assume you put something like a Goodman furnace in Property A and an American Standard furnace in Property B. The Goodman furnace is going to run you $2700, the American Standard will run you $3700. By year 15, you end up replacing the Goodman furnace, while the AmStand makes it through the 20 years and you sell with the same furnace in place.
3. You do an $8K roof replacement on both 10 years into owning them, but Property A suffers some additional roof damage right after the replacement and requires another $4K to fix before you sell.
4. Over 20 years in Property A you have 4 turnovers that each cost $2K in turnover fix-up costs and lost rent. Over the same period you have 2 turnovers with the same costs in Property B.
5. Assume both properties racked up $4K in additional minor service calls and fixes during 20 years.
6. Assume you break even on depreciation capture and property appreciation when you sell (again, this is D-class) and end up with $30K each cash in pocket.
Over the course of 20 years, each property provided $48240 in cash flow and it paid itself off. So you made $78240 on each $30K investment. Property A cost you an additional $28400 over the course of owning it, Property B cost you $19700. Your cashflow for Property A comes out to $206.16/month. Your cashflow for Property B comes out to $243.33/month.
The selling price plays a gigantic part in getting to that final number. Imagine if you managed to sell Property A for $50K after depreciation capture, thanks to significant appreciation, or maybe you managed a 1031 exchange into the purchase of a new property. $206.16/cash flow per month turns into $291.00 based on that one parameter change.
I think some of you are over thinking this. We know cash flow can vary. We know there are unexpected expenses. We know you have to take into account multiple factors but it's basic, if a person is making $400 a month after everything is paid then that's it. That's what most people want to know. We know a lot goes into it but if one property is making $200, another is making $400, and another making $1000, currently thier cashflow is $1600.
@Thomas S. and I typically don't agree on much, but he's making an extremely valid point here that isn't talked about frequently enough in the forums -- you never really know on cashflow until you're completely done with a property. In our self-managed business with C/D-class borderline properties, our biggest expenses are HVAC-related, roof-related, and turnover-related. It's really hard to be sure what a property will cost you or make you until you're done with it.
Here's an example with simplified parameters.
1. Assume you buy two D'class properties in year 1 for $30K each, rent for $600/monthly each, total property taxes $119/monthly, monthly debt payment $320/monthly each on a 20-year commercial loan. Cash flow after taxes but before operating expenses = $201/month.
2. Assume both furnaces are shot when you buy. Assume you put something like a Goodman furnace in Property A and an American Standard furnace in Property B. The Goodman furnace is going to run you $2700, the American Standard will run you $3700. By year 15, you end up replacing the Goodman furnace, while the AmStand makes it through the 20 years and you sell with the same furnace in place.
3. You do an $8K roof replacement on both 10 years into owning them, but Property A suffers some additional roof damage right after the replacement and requires another $4K to fix before you sell.
4. Over 20 years in Property A you have 4 turnovers that each cost $2K in turnover fix-up costs and lost rent. Over the same period you have 2 turnovers with the same costs in Property B.
5. Assume both properties racked up $4K in additional minor service calls and fixes during 20 years.
6. Assume you break even on depreciation capture and property appreciation when you sell (again, this is D-class) and end up with $30K each cash in pocket.
Over the course of 20 years, each property provided $48240 in cash flow and it paid itself off. So you made $78240 on each $30K investment. Property A cost you an additional $28400 over the course of owning it, Property B cost you $19700. Your cashflow for Property A comes out to $206.16/month. Your cashflow for Property B comes out to $243.33/month.
The selling price plays a gigantic part in getting to that final number. Imagine if you managed to sell Property A for $50K after depreciation capture, thanks to significant appreciation, or maybe you managed a 1031 exchange into the purchase of a new property. $206.16/cash flow per month turns into $291.00 based on that one parameter change.
You are more talking about an over all ROI.
Most are not delving that deep into determining thier cashflow.
@Michael Baradell. Probably 200 a month. My overall goal is probably 200k a year eventually
@Thomas S. and I typically don't agree on much, but he's making an extremely valid point here that isn't talked about frequently enough in the forums -- you never really know on cashflow until you're completely done with a property. In our self-managed business with C/D-class borderline properties, our biggest expenses are HVAC-related, roof-related, and turnover-related. It's really hard to be sure what a property will cost you or make you until you're done with it.
Here's an example with simplified parameters.
1. Assume you buy two D'class properties in year 1 for $30K each, rent for $600/monthly each, total property taxes $119/monthly, monthly debt payment $320/monthly each on a 20-year commercial loan. Cash flow after taxes but before operating expenses = $201/month.
2. Assume both furnaces are shot when you buy. Assume you put something like a Goodman furnace in Property A and an American Standard furnace in Property B. The Goodman furnace is going to run you $2700, the American Standard will run you $3700. By year 15, you end up replacing the Goodman furnace, while the AmStand makes it through the 20 years and you sell with the same furnace in place.
3. You do an $8K roof replacement on both 10 years into owning them, but Property A suffers some additional roof damage right after the replacement and requires another $4K to fix before you sell.
4. Over 20 years in Property A you have 4 turnovers that each cost $2K in turnover fix-up costs and lost rent. Over the same period you have 2 turnovers with the same costs in Property B.
5. Assume both properties racked up $4K in additional minor service calls and fixes during 20 years.
6. Assume you break even on depreciation capture and property appreciation when you sell (again, this is D-class) and end up with $30K each cash in pocket.
Over the course of 20 years, each property provided $48240 in cash flow and it paid itself off. So you made $78240 on each $30K investment. Property A cost you an additional $28400 over the course of owning it, Property B cost you $19700. Your cashflow for Property A comes out to $206.16/month. Your cashflow for Property B comes out to $243.33/month.
The selling price plays a gigantic part in getting to that final number. Imagine if you managed to sell Property A for $50K after depreciation capture, thanks to significant appreciation, or maybe you managed a 1031 exchange into the purchase of a new property. $206.16/cash flow per month turns into $291.00 based on that one parameter change.
You are more talking about an over all ROI.
Most are not delving that deep into determining thier cashflow.
Ergo, cashflow can be an illusory metric in many ways when you invest in single-family, especially the C/D classes.
@Michael Baradell roughly $400-500 per door. I know this is hard, but I seek off market MLS deals that need lots of rehab and tenant turn rounds. I now manage 29 doors, but had to rehab every single unit. I buy and hold 4 plexes, and also have a 5 and 8 plex. I also manage these myself with a full time job. I am tired a lot ! Lol
@Thomas S. and I typically don't agree on much, but he's making an extremely valid point here that isn't talked about frequently enough in the forums -- you never really know on cashflow until you're completely done with a property. In our self-managed business with C/D-class borderline properties, our biggest expenses are HVAC-related, roof-related, and turnover-related. It's really hard to be sure what a property will cost you or make you until you're done with it.
Here's an example with simplified parameters.
1. Assume you buy two D'class properties in year 1 for $30K each, rent for $600/monthly each, total property taxes $119/monthly, monthly debt payment $320/monthly each on a 20-year commercial loan. Cash flow after taxes but before operating expenses = $201/month.
2. Assume both furnaces are shot when you buy. Assume you put something like a Goodman furnace in Property A and an American Standard furnace in Property B. The Goodman furnace is going to run you $2700, the American Standard will run you $3700. By year 15, you end up replacing the Goodman furnace, while the AmStand makes it through the 20 years and you sell with the same furnace in place.
3. You do an $8K roof replacement on both 10 years into owning them, but Property A suffers some additional roof damage right after the replacement and requires another $4K to fix before you sell.
4. Over 20 years in Property A you have 4 turnovers that each cost $2K in turnover fix-up costs and lost rent. Over the same period you have 2 turnovers with the same costs in Property B.
5. Assume both properties racked up $4K in additional minor service calls and fixes during 20 years.
6. Assume you break even on depreciation capture and property appreciation when you sell (again, this is D-class) and end up with $30K each cash in pocket.
Over the course of 20 years, each property provided $48240 in cash flow and it paid itself off. So you made $78240 on each $30K investment. Property A cost you an additional $28400 over the course of owning it, Property B cost you $19700. Your cashflow for Property A comes out to $206.16/month. Your cashflow for Property B comes out to $243.33/month.
The selling price plays a gigantic part in getting to that final number. Imagine if you managed to sell Property A for $50K after depreciation capture, thanks to significant appreciation, or maybe you managed a 1031 exchange into the purchase of a new property. $206.16/cash flow per month turns into $291.00 based on that one parameter change.
I appreciate the detailed response! My thought would be that the expenses you named, would not be part of the cashflow though, because those expenses were already accounted for in the beginning. Is that not the correct way of looking at it?
For example, if I factor in a percentage for, Vacancy, CapEx, Management, and repairs and subtract all carrying costs, that is how I see the cash flow. Now, I fully understand that number will not be exact over a 10 or 15 year period, however, if I put those funds aside in an account, it should cover those expenses over time where I would not be using my actual "cash flow" to cover these expenses. Should I look at this differently?
@Todd Powell are you buying cash or financing these units? If financing, how much of a down payment are you typically in for?
Also, what software/systems are you using for the property management side?
@Michael Baradell- 12% cash on cash minimum. I don't set a $ limit, because I can just put a lot down to achieve that and have a crummy return... so 12% CoC at least.
@Thomas S.- I agree with Thomas except that a higher DP absolutely will increase cash flow, it’ll just do it at the sacrifice of your return... I prefer keeping the return high, and placing the cash in other deals...
same point either way- it’s not about the $ amount of the cash flow as much as it’s about the % return.