Cash flow minimum on SFH

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Cash flow minimum on SFH

Jeremy Torres
Rental Property Investor · TX (texas) · Member since 2019 · 121 posts · 33 votes

I’m 22, and will be closing on my 2nd rental property soon🥳🎉🏠

it hurt putting 20% down, ouch !

My main question is what’s the minimum cash flow you want after mortgage is paid ?

My first one is $247/mo

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
5y
Originally posted by @Jeremy Torres:

I’m 22, and will be closing on my 2nd rental property soon🥳🎉🏠

it hurt putting 20% down, ouch !

My main question is what’s the minimum cash flow you want after mortgage is paid ?

My first one is $247/mo

I started out trying to get $200 or more in cash flow for each property, but it depends on your goals. At the time, my goal was to generate enough cash flow that I could be financially independent. I reached that goal and still enjoy working with no signs of stopping, so now I am focused on other goals.

Don't forget: there are other ways to benefit from real estate like tax benefits, appreciation, or building equity over time. Cash flow is just one measure of a good investment and how you aim to benefit from a property really depends on what you're trying to achieve.

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  • Shiloh LundahlPro Member
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    5y

    Great Job @Jeremy @Jeremy Torres. For your first property you are cash flowing.  That is fantastic.  Here on BiggerPockets you will get people who are more experienced who will tell you that you should invest a certain way to get better returns.  And to be honest, they are right.  But they also have more experience.  But for now, you hit the ball and got on base.  Good for you.

    Let me share another way to look at whether a deal is a good deal or not other than just cash flow.  Let's say I am able to purchase a property for 200k that is worth 250k but I only cash flow $100 a month.  Is it a good deal?  I would say yes. The reason why is because I was able to create 50k of value by buying the property 50k under market value.  After 2 years, let's say I sell it for 260k.  Let's also say I was able to get 50k in profit after realtor fees and closing costs.  I would take this deal, even though it only cash flowed $100 a month over a deal that cash flowed $300 a month that I bought at market value.  

    You see, having a hard, fast rule sometimes limits you and keeps you out of deals that would be financially beneficial. It is helpful to look at the deal as a whole to determine whether it will be a good deal rather than just the amount of cash flow a property is projected to make each month. In other words, look at the IRR (Internal Rate of Return) over just the cash flow or cash on cash return.

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  • Zhixin Wei
    Member since 2021 · 6 posts · 3 votes
    5y

    @Nathan G.

    Love your points on different goals at different stage of our investing career. Do you have any good guidance books or references about goal setting?

    I am at the very beginning stage of real estate investment via “buy and hold “ , trying to generate cash flow and build up equity. What’s the bigger picture once I have a few cash flow properties? Thank you very much!

    1Reply
  • Account Closed
    Rental Property Investor · Canton, OH · Member since 2017 · 1k+ posts · 1k+ votes
    5y

    @Jeremy Torres

    To clarify is $247 the amount left after paying principle and interest?

    Or is that after paying principle, interest, taxes, insurance, etc.?

    0Reply
  • Jeremy Torres
    OP
    Rental Property Investor · TX (texas) · Member since 2019 · 121 posts · 33 votes
    5y

    @CJ M. Yes. my mortgage payment includes taxes, insurance, & interest. After I make the monthly payment it’s $247/mo in my pocket

    0Reply
  • Brett Denner
    Member since 2019 · 4 posts · 0 votes
    5y

    If you understand your market this question kinda answers itself.

    If an average deal in your market would cash flow $200 then you are doing well at $247. If an average deal in your market would cash flow $300 then you may want to reconsider. 

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    5y

    No, and I'm not an expert on setting goals. I'm very good at focusing on what is in front of me. I am not good at looking long-distance and working towards a vision. I set a general goal of reaching financial independence in five years, determined a budget of what that would take, and started working towards it by investing in real estate. I was not systematic (e.g. I will buy five single-family homes in 2019, each one cash flowing a minimum of $250 per month) but just plugged along as quickly as my finances allowed. God has blessed us these past five years and we reached independence early.

    I am successful because of hard work and long hours, not because I'm particularly smart. Once I reached my goal, I decided it was time to do focus on two new things

    • Slow down so I can enjoy life and family more; and
    • Use my gifts to bless others

    There's a lot to it, but my focus now is to grow my portfolio until I reach my ultimate goal of $300,000 income per year. Why that number? Because it will allow me to donate $150,000 per year to charity, $50,000 towards new investments (or flexibility), and I can live a very comfortable life with a budget of $100,000. Like my previous goal, I am not writing it down or taking specific steps to achieve this. I believe God directs my success so I'm doing the best I can with what I've got and leave it up to Him to decide when I'll get there, if at all.

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  • Jim K.
    Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
    5y

    @Jeremy Torres


    I'd just like to emphasize that what @Shiloh Lundahl said really is most important right now. You hit the ball and got on base. I cannot tell you how many wannabe players talk and talk yet never come to the plate, just that I've met a huge number of them in my time in real estate.

    Hard and fast metrics are easy ways to look at your property, but the truth is that you have to completely understand what they represent if you're going to make valuable decisions based on them. And then there's the fact that the more properties you have, the more moves you'll be able to make, so really, the less useful the cookie-cutter metrics become.

    Right now, you own a property that you're not losing money on. Now is the time to figure out what you want to do with it. It's not the time to vaguely worry that you might be missing out if you don't make a move immediately. That's FOMO, and FOMO drives the majority of bad decisions in real estate.

    0Reply
  • Zhixin Wei
    Member since 2021 · 6 posts · 3 votes
    5y

    @Nathan G.

    Thank you!

    “ For I know the plans I have for you”, declares the Lord, “ plans to prosper you and not to harm you, plans to give you hope and a future “

    God Bless!

    1Reply
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