Cashflow per door for larger properties vs cashflow for less doors

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Cashflow per door for larger properties vs cashflow for less doors

James WilcoxBusiness Member
Real Estate Agent · Bowling Green KY ~ Lexington, KY · Member since 2015 · 1k+ posts · 603 votes

Looking at cashflow only, is it very common for the cashflow per door/unit exponentially go down as you invest in properties with more doors? For example a fourplex that might yield a $100 per door (4 doors) is higher in cashflow per door then a 28 unit apartment building that might bring $20 per door. (made up numbers)

Why does the 28 unit not bring close to the $100 per door? Is there a number that is too low per door for larger complexes (minimum cash flow requirement)?

REI James w/ eXp Realty54 Reviews
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  • Igor Tomic
    Real Estate Agent · Ottawa Ontario · Member since 2014 · 61 posts · 29 votes
    11y

    Can't help you but you should #AskBP and someone might answer you on there. Interesting question tho. Good luck

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  • Ben Leybovich
    Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
    11y

    I think your numbers and thinking is a bit off...

    $100/door on a small building may work, but only when there's value add to push that higher, and only under 100% financing. If you put 20%-25% down and all you have is $100/door on paper, with no room to push, it's just a matter of time before you loose money - at least as it relates to cash flow.

    Bigger buildings, those that require pay roll, are a different game. These will likely cash flow less, but those shouldn't be bought for cash flow only, and should be underwritten to the IRR.

    Hope this helps, Jim!

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  • James WilcoxBusiness Member
    OP
    Real Estate Agent · Bowling Green KY ~ Lexington, KY · Member since 2015 · 1k+ posts · 603 votes
    11y

    @Igor Tomic thx. It is an odd question.

    Yes @Ben Leybovich you are always very helpful. I will admit that I don't have any larger multi experience (may change soon) and only a SFR so it is hard for me to turn off that part of my brain. I just have a buy and hold mindset really. I look a lot at cash flow and cash on cash ROI mostly with the other metrics falling behind those.

    I have been wanting to get into more commercial, but have a hard time looking past the cash flow part. I agree that it isn't the metric I should be worried about too much for the larger units. I just get a little freaked when I plot a larger unit out and see the numbers on cash flow per door. I will look more into IRR and building value into the larger unit properties and hopefully I will be able to see the investment in a new light.

    REI James w/ eXp Realty54 Reviews
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