Rental Analysis - Cash Flow

[Patrick I.]

Hi MN BP Community!

I was wondering if you could share with me your experience regarding analyzing rental property and what your ideal cash flow looks like!

Brandon Turner (BP Co Host), when analyzing rental properties, likes to allocate some portion of the rental income to what he calls "Variable Costs". Mostly he allocates: 5% to Vacancy, 5% to repairs, 10% for CapEx and 10% for property management. I understand that these numbers are subjective to the market itself (and the investor) because when I used the methodology with the % given above, the cash flow is always about $100 or less with a cash on cash ROI less than 7%. So I was wondering:

1. What are some of the "variable costs" that you include in the analysis (with the respective % allocation)? 

2. What is your average cash flow per unit on your properties in MN?

3. What is you ideal cash flow?

Thank you all

[Laura Thorne]

Hi Patrick, I bought my first duplex a year ago and used those numbers as well.  According to the numbers I'd have ~$400/month of cashflow (I was managing the property myself).  Instead I made $300 for the whole year.  I had inherited a tenant that did not pay rent on time and I ended up evicting him.  It ate up most of my cashflow, BUT now I have new tenants who pay on time so I am likely to hit that number and build up my reserve for cap ex.  I think $100-150/month/door is good.  I hire out most things-- I work full time and a mom too, so if I can get that number I consider that good!