What's your cash flow goal?
Michael BaradellBusiness Member
Property Manager · New Orleans, LA · Member since 2013 · 184 posts · 34 votesWhat's your cash flow goal?
Most Popular Reply
Baltimore, MD · Member since 2019 · 80 posts · 47 votes
7yMy 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.
86 Replies
- Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes7y
@Syed H I have achieved $300 plus. There are just too many things to take into consideration to declare what is and isn't likely. If you know how to buy and run the numbers properly those returns are there. Most in my network have at least that. I mean markets are different, areas are different, approaches are different, jurisdictional legislation is different and regional prices are different. Saying what is hard to achieve across an entire spectrum makes no sense.
- Rental Property Investor · Reno, NV · Member since 2019 · 4 posts · 0 votes7y
@Michael Baradell $1,000,000’s
- Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes7y
Originally posted by @Mark Cruse:
@Syed H I have achieved $300 plus. There are just too many things to take into consideration to declare what is and isn't likely. If you know how to buy and run the numbers properly those returns are there. Most in my network have at least that. I mean markets are different, areas are different, approaches are different, jurisdictional legislation is different and regional prices are different. Saying what is hard to achieve across an entire spectrum makes no sense.
Like I said it’s not the norm. There are definitely exceptions and wildly different markets.
I've seen plenty of investors numbers both on the lending/brokerage side & of course as an investor. SFH capex is usually not properly accounted for. That's where I see most investors underestimate by a large margin. It's also hard to know this number without a cost segration, historical, and viable assumptions for a long term analysis.
Anyways, I know nothing about your market. Good for whatever you have accomplished. Everyone has different criteria and different Methods to analyze return metrics.
- Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes7y
Originally posted by @Jim K.:
@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 typically clear $500 per door or more monthly, most are $800 to $1,000 though and along with that I get $25,000 down nonrefundable Option deposit. I'm not sure how to calculate that into cash flow. I buy using Subject To (taking over a low interest mortgage) and I bump the payment up to market rates for my tenant buyers. I'm typically into a property for $15,000 or less for a $220,000 property. No bank loan needed. I sell on Lease Option to tenant buyers who take over all repairs and maintenance. So I don't have cap ex. I still get all of the tax write offs tho'.
It's kinda different but a handful of us on Bigger Pockets do this in various parts of the country. Its easier to follow as a spreadsheet at:
Average Turnkey Cash Flow Per Door In Phoenix Metro Area No Bank Needed
- Investor · Philadelphia, PA · Member since 2010 · 739 posts · 372 votes7y
Originally posted by @LuAnn Leighton:
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.
Looking for hard money lenders that would finance a flip in the Baltimore area, hence I am on my way.
Very aggressive. Be careful
- 7yTwana RasoulBusiness MemberReal Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
@Michael Baradell for everyone it is different based on location, financial health, goals, type of property, type of market, down payment amount, type of financing, etc. also, cashflow on paper could be different than cashflow in real life.
I don’t have specific number. I’ll more than happily take slightly negative cashflow for the right property and 90-100% seller financing as an example.
Best of luck!
Compass5122 Reviews - Investor · Woodbridge, VA · Member since 2019 · 162 posts · 64 votes7y
@LuAnn Leighton
I'm doing something similar in Baltimore.
My goal is 3 years @$300/mth, around $10k/mth to retire, then focus on developing multi-family homes @ year 5. Using BP/tools, I've found some HML to work with.
- 7yBrad LarsenPro MemberProperty Manager · San Antonio and Austin, TX · Member since 2016 · 377 posts · 380 votes
We look to break even. To do this, you put the least amount down into the property you can, and you keep it rented to cover the expenses. You win big time on the Depreciation write offs, and of course the eventual Appreciation. This break even eventually starts to turn into cash flow as the rents go up. The concept of replacing income from work with cash flow from rental properties starts with large amounts of cash. Those only make sense to cash flow.
If you are starting with a little, get in with a little .... and be happy to break even.
- Member since 2019 · 117 posts · 45 votes7y
We look at several numbers
20% cash on cash return
300 a door
25% bottom line on gross rents
We are not appreciation buyers but cash flow
Our deals look like this
65,000 purchase price
1100 in rent+ utilities
3000 a yr in taxes
25% down and 75% financed
- Rental Property Investor · Boise/Portland · Member since 2017 · 709 posts · 742 votes7y
The definition of "Cash Flow" seems to be understood to mean different things to different investors. Its a topic that's being discussed, or should I say fleshed out, more often here on BP. Can you believe that someone actually had the audacity to say that cashflow includes gross rental income, which was justified by claiming ALL the cash went into your pocket first, then afterwards you spent it on various obligations; taxes, mortgage, insurance, etc. Arguable of course, but smart investors are looking at IRR and CoC in addition to cashflow. The metric of determing cashflow based on the static rule of thumb is not an end in itself. Its only one part of the totality of looking at the financial health of the asset.
Defining a "cashflow goal" is a limited goal that misses what others are pointing out in the thread.
- Realtor · Albuquerque, NM · Member since 2017 · 121 posts · 68 votes7y
$500/door - I put anywhere from 30-50% down on a property though. I'm not building my 'empire' quickly. I save all year, and buy a new property each summer. I take the low risk approach. I haven't had much turnover in my properties and when I have (longest 2 weeks), I didn't worry about it because my mortgages are all very reasonable.
We each have our own methods to investing. I like to see everyone's goals - it's fun to see how each of us reaches our individual goals.
- Rental Property Investor · Atlanata, GA · Member since 2014 · 4 posts · 0 votes7y
$200 + per door after all expenses are paid is what I look for
- Real Estate Agent · Salt Lake City, UT · Member since 2014 · 473 posts · 230 votes7y
$300/mo. Although more importantly we are looking for 20% cash-on-cash return as a minimum.
- 7yKevin McGuirePro MemberCTO of BiggerPockets · Seattle, WA · Member since 2019 · 168 posts · 178 votes
@Thomas S. Agree. I find cash flow is often the wrong question. I first look at cap rate to decide if I like the investment. Then I consider DP, financing, and their affect on cash flow as a separate issue which affects my ability to afford the deal. If you're tight on cash then CoC matters but it doesn't measure the value of the deal, just the financial arrangement you came to.
- Rental Property Investor · Tel Aviv, Israel · Member since 2019 · 15 posts · 5 votes7y
$20K/mo.
- Investor · Saint Paul, MN · Member since 2015 · 663 posts · 512 votes7y
@Michael Baradell
4 to 6 duplexes all paid for, cash flowing 6k to 8 k.
- Investor · Saint Paul, MN · Member since 2015 · 663 posts · 512 votes7y
Let me add on to my last post, what I meant was that is the end goal.
- Ph.D.E.E. · Member since 2019 · 2 posts · 0 votes7y
To Thomas S.: Maybe in your neck of the woods, but not mine. I get about $333/mo ($4000/yr) cash flow on each of my 12 SFR's in metro Atlanta (bought $105K to $165K, now worth $180K to $220K, rent $1300-$1450). That's a good chunk of what I'll be retiring on. That's expenses all in. This ignores appreciation completely, upon which I don't rely. This houses were bought at retail cost with no rehab, in order to max out my leverage (then requiring 15%, 20%, or 25% down, but the 25% is no longer required on Fannie Mae I hear). Also you connect "cash flow" with "day you sell". These are unrelated. I think we're all talking buy-and-hold here. While I don't rely on appreciation, I appear on paper to be making over 20% ROI on appreciation only, with 8% to 12% ROI on cash flow. (To Sean Autry: CoC starts above 12% then decreases when divided by current appreciated/inflated equity rather than original investment. I call it ROoI vs ROeI, return on original investment versus return on equity investment. After all, I could sell and invest in something else, or split into multiple properties to re-leaverage, so ROoI is not as valuable to know as ROeI.) I intend to hold essentially forever. ... Your response to Jessie Nunley is reasonable. I agree to a limited extent. There's still moving time, PAST and FUTURE as I mention below. Note that doing a rehab is similar to your talk of buying cash flow. I don't do buy-fix-and-hold in part because of that.
LuAnn Leighton from Baltimore, MD. I think your goals are admirable and achievable, IFF you can manage all the purchase cost. Your $200/month depends on your local market, so I can't speak to that directly. To buy it all, you may be intending to buy-fix-and-hold. That's fine if you have the time and money to fix. Personally, I went for the leverage instead, buying at retail (less my self-agent 3% buying commission.) For a fixed amount of excess income to invest, this maximized my total cash flow. (I realize the calculation and decision may vary for you and your market.) Do keep one thing in mind. Right now, my fixed 30-year mortgage payments (PITI) are about 60% of my rent. The fixed PI is about 42% of the rent. When I calculate 3% inflation in TI (Tax/Insurance) and maintenance, matched by 3% increase in rent, it turns out that the cash flow is ALSO well leveraged to produce 8% growth. (Real math!) Adjusting for inflation, that's about a 5% growth. Over time, as it grows and grows, the leverage reduces and the growth slows. Nevertheless, I point this out for the following reason. Your $20K/month of passive income, under the same 3% inflation assumptions, might grow 5% for a long time. Remember, this 5% if inflation adjusted. So in just 10 years after reaching your goal (1.05^10=1.62), the $20K/month becomes equivalent to over $32K/month in today's dollars. NICE. So don't forget about not only leveraging the purchase to get more cash flow per dollar invested, and more appreciation per dollar invested, but also fixed loan math that leverages your cash flow into great growth when rents inflate. (Warning, of course, the reverse happens when rent deflates. If the Feds let us have overall deflation (very rare, Google for 100 years of inflation), then things will go to h*ll in a handbasket very rapidly. So keep those reserves!!!
Mark Cruse: Yes, FUTURE cash flow is always a guestimate. PAST cash flow is reality. Qualify your tenants well. Carry good insurance. I've been going many years with good cash flow. If it ever gots to pot consistently, then fix and sell. I'll still have a net of good cash flow.
Jim K: But you can't plan a business with the mentality that you'll never know. You must plan and predict and make a judgement call. Then do the best you can to meet your estimates. The original poster can't do anything with an answer like "you'll never know". Furthermore, if I ***DIE*** owning my properties, then the selling price was ***NOT*** a factor in my cash flow. I don't care what RIO my heirs get. (No kids. Nephews. Charities.)
Todd Powell: You're welcome to do lots of rehab. But how much is that costing you? Are you doing that labor yourself? Could you spend your time earning other money? You're unleveraging yourself by doing rehab. Yes, I like reasonable leverage with good reserves. My mortgage/rent is about 60%, before maintenance (that gets deferred in extremely bad times), so there's safety there. Plus I keep 6 months mortgage in reserve. (Plus I keep 6 months living expense in reserve as well, that's equivalent to another 4 months of mortgage reserve.)
Michael Baradell: I'm saving a portion of *excess* cash flow for long term repairs. No, I wasn't saving enough so I will indeed rely on my rent inflation cash flow growth. So in the past I wasn't earning $4000/yr after long term repair savings. But now I'm turning that corner. Rents have already grown 23% since I started SFRs. Again, I'm hoping for no rent deflation.
- 7yChristopher DerrPro MemberInvestor · Garner, IA · Member since 2013 · 70 posts · 36 votes
TONS of variables, to many for a simple answer.
- Baltimore, MD · Member since 2019 · 80 posts · 47 votes7y@Mark Cruse, I actually do not have any properties yet. My goal is to purchase 1 in June and another in September/OctoberI understand my goals are aggression, but realistic. There are many who have done a lot more. I will keep you posted on my progress.
- Member since 2019 · 7 posts · 2 votes7y
Simple. In this market, atleast12% should be your gross return of your 25% down payment ( = your investment). ie., for a $200K turnkey single family residential, your initial investment would be $50K and you should see atleast 6K /year (including the part of the principle that is being paid as rent by your tenant ).
If you know the market very well and got other source of income for the time being, then you may bring it down to 9%
Want to settle for anything < 9% but > 6%, you always got high dividend stocks (keep an eye on the market twice a day). Want to settle for anything < 6%, you always got municipal bonds.
- Lender · SAN JOSE, CA · Member since 2018 · 19 posts · 2 votes7y
@Kyle M.
How’d you come up with this number? I’m curious on why the range between 200-250
- 7yDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votesMy goal is $500/unit at 5 years with a reasonably high LTV. This is to be obtained by value add and/or rent appreciation but not by having a low LTV. Comparing cash flow without knowing the LTV, vacancy estimates, maintenance/cap ex estimates is like comparing an apple to who knows what. My LTV varies significantly on our units . I can compare as though all units have a 75% LTV (I artificially lower some of the cash flow if the LTV is lower than 75%). Cash flow is a single profit source. I would not ignore the other sources of profit. In general, market appreciation leads to increased cash flow but great cash flow does not necessarily lead to market appreciation.
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