What is a good cash flow

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Rachel Mazzanti
Virtual Assistant · Remote · Member since 2020 · 96 posts · 45 votes
2y

While the $250 cash flow target gets thrown around a lot, it's important to remember that cash flow is all about the investor's strategy. Location can make a big difference - that $250 target might be fantastic in a pricier area, but unrealistic in another market. Are you looking for a long-term rental or a house hacking situation with short-term tenants? Your cash flow expectations will likely differ depending on your goals. Maybe steady cash flow is less important to you than the potential for appreciation. The key is to analyze each property on its own merits, considering factors like cash on cash return, appreciation potential, and how it aligns with your overall investment strategy.

I stopped listening to podcasts. It's the same stories rewritten and told in many different ways. Some times I think these podcasts have other agendas lol

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  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    2y

    @Larry Cersosimo

    Real estate investors frequently utilize the $250 cash flow per door measure as a reference, especially when purchasing multi-family buildings. This measure, however, is not always relevant and can change based on a number of variables, including market circumstances, location, property type, financing terms, costs, and vacancy rates. Investors analyze income, costs, financing conditions, market rents, operating efficiency, and other dangers in order to assess cash flow potential.

    Increased revenue from tenants, extra sources such as laundry facilities, parking fees, and storage rents, as well as mortgage payments, property taxes, insurance, maintenance expenses, utilities, property management fees, vacancy allowance, and capital expenditures. Understanding the rental market and looking into comparable properties is critical for making accurate estimates. Efficient property management may save expenditures while increasing cash flow.

    Cash flow can be impacted by risk variables including market circumstances, economic downturns, and unforeseen costs. A good return on investment and sufficient income to meet expenditures are the goals of cash flow-positive properties, which attract the attention of savvy investors. Performing comprehensive financial evaluations and due diligence on every property is necessary to precisely ascertain its potential for cash flow.

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  • Benjamin Sulka
    Cleveland, OH · Member since 2022 · 826 posts · 578 votes
    2y
    Quote from @Nicholas L.:

    @Jaron Walling

    yep.  Jason Hartman has great content on this.  he says that folks who bought when rates were low were buying like it was 2011 because as we all know - price + rate = payment. and most people don't pay cash!

    also congrats on your vote to post ratio.  just noticed we have about the same number of posts but apparently i only add value 66% of the time and you add value 92% of the time =)

    every time someone asks "how do i get started" i respond "house hack" and those posts don't get a lot of votes i guess.  ha!


     The "house hack" posts make me chuckle every time haha. Straight to the point and accurate. 

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  • Benjamin Sulka
    Cleveland, OH · Member since 2022 · 826 posts · 578 votes
    2y

    @Larry Cersosimo, 

    Like many others said, it greatly depends on your situation. I'm personally looking to house hack a duplex at 5% down. At 5% down and 7% interest, this property is not going to cash flow when I move out or even several years down the line. 

    Different people have different goals. I really like what I do for work and don't plan on getting out of that industry to go into REI full time. I have some entrepreneurial goals in the field that I'm in but don't plan on trying to use real estate to replace my income. So in my situation, negative cash flow is completely fine if I'm paying less than I would renting, getting a real estate investing education by actually buying a deal, learning how to landlord, etc.

    Assess what your personal situation is  see what makes sense for you! 

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  • Jason Hartman
    Rental Property Investor · Scottsdale, AZ · Member since 2012 · 314 posts · 146 votes
    2y

    Glad it's helpful @Nicholas L.! 

    1Reply
  • John MorganPro Member
    Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
    2y

    @Larry Cersosimo

    I’m good with $250 when I’m investing in a good appreciating area. But need $400-$500/month in bad appreciating areas. I invest in both. Over 10 years you’re much better off in good appreciating neighborhoods in hot markets.

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  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    2y

    $200 has been a good average for a long time. But you can't look at cash flow out of context. 

    In Milwaukee it is seemingly still relativley easy to achive $200 a door out of the gate. At least according to your spreadsheet. The reality looks different, as you are probably in a rougher neighborhood which means additional cost and lost rent. And a 60-120 year old building, which sooner or later will need $50-70 per square foot in rehab. That will quickly eat a decade of cash flow or more.

    Most of what I have bought in recent years barely breakes even, but they are in great condition and very good locations. Most of what I have bought a decade ago cash flows much more than that. So you have to give it time.

    My tip, play with the BP rental calculator and start with a $1M property value, 10k in rent and very conservative assumptions for rent growth and appreciation. And then watch what happens after year 10, 20 and 30. Play the long game!
      

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  • Jacob Sherman
    12 Penns Trail Suite 138 Newtown, PA 18940 · Member since 2023 · 1k+ posts · 319 votes
    2y
    Quote from @Larry Cersosimo:

    I hear on many podcasts that people wont entertain a property unless they can hit $250 of cashflow for the door. What do yall think and how do your properties cashflow


     25% over mortgage, taxes and insurance is considered solid 

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  • Joseph Pappas
    Lender · Nationwide · Member since 2024 · 12 posts · 5 votes
    2y
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  • Jacob Sherman
    12 Penns Trail Suite 138 Newtown, PA 18940 · Member since 2023 · 1k+ posts · 319 votes
    2y

    10% on a real estate investment is considered good 

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  • Bryan Streeter
    Member since 2024 · 2 posts · 0 votes
    2y
    Quote from @Calvin Thomas:
    Quote from @Larry Cersosimo:

    I hear on many podcasts that people wont entertain a property unless they can hit $250 of cashflow for the door. What do yall think and how do your properties cashflow


     $400-$600 a door or it's not worth my time.


    When you say $400-$600 per door, is that Gross (before CapEx, Maint, Utilities etc) or NET? Seems damn near impossible to hit that unless you're putting %50 down.

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  • Calvin Thomas
    Developer · New York City, NY · Member since 2015 · 812 posts · 718 votes
    2y
    Quote from @Bryan Streeter:
    Quote from @Calvin Thomas:
    Quote from @Larry Cersosimo:

    I hear on many podcasts that people wont entertain a property unless they can hit $250 of cashflow for the door. What do yall think and how do your properties cashflow


     $400-$600 a door or it's not worth my time.


    When you say $400-$600 per door, is that Gross (before CapEx, Maint, Utilities etc) or NET? Seems damn near impossible to hit that unless you're putting %50 down.


     NET. I put 25% down.  Looking at a building now.  It's a little dated, so I will have to invest about 10k to turn it around.  I subtract that from my offer and run my numbers as:

    Rent (estimates from the MLS on closed rentals in the last 3-6 months; we have access).

    Insurance (we go to an independent broker; who happens to work for my company, so we bid everything out to dozens of insurance companies for some estimates)

    Taxes (we challenge them after a year of owning)

    Water/common charges

    We do not add PM fees as we manage all of our properties ourselves.  We have a team of 16 in-house techs.  It is much cheaper than hiring a third party.  

    Rent increases, and it's very rare that we have an acquisition without tenants. We send notices of the increases within 30 days of the completion of the sale, should they be month-to-month.  

    Value add: We look for ways to add value to the property, such as a laundry room/machines (electronic, no cash), vending, adding water metering under our new leases, etc.

    If it doesn't work, it doesn't work. However, it's not worth it for less than 400-600 a door.  A building I am looking at now will bring us around 1k a door in a nice area in Westchester, NY.  

    You need to be selective on what you buy. However, I'd never understand how some people are giddy about making $200.00 bucks a month on BP.  The deals are out there; one has to look for them.

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