Generating $100 of cash flow?

19 Replies

Hi everyone, this may sound like a silly question but Brandon Turner has mentioned several times in his webinars on analyzing rental properties, that his goal is to at least profit $100 cash flow per unit (and 12% ROI). Doesn't $100 a month seem low? This doesn't motivate me, what am I missing here? Wouldn't it take A LOT of rental properties to have a cash flow of, lets say $5,000 a month?

Can someone please explain why $100 a month is actually pretty good?  

P.s. I do not have a rental property yet, looking to house hack a duplex soon. 

Thanks guys!!

100 is decent. The challenge is the market it HOT all over the country. 5 years ago cash flow was relatively easy to come by but things have changed and a lot of people are investing and breaking even on the cash flow and even negative sometimes as they are counting on cash flow. I don’t recommend this strategy and a lot of people on BP will agree. Every market and deal is different so while $100 cash flow isn’t great it’s still cash flow and like I said not easy to come by like it used to. Hope this helps.

$100 per month doesn't seem like much. It didnt' motivate me when I was new either.

There is more profit here, but it's harder to see.

1st off, your $100 is a return of WHAT amount? If you put $10,000 in, and earned $1200 for the year, that's really good. What if you earn $100 and having nothing invested. That's free money.

What about appreciation, the house might go up in value

What about amortization? The loan is going to get paid off by someone else

What about depreciation? The government is going to give you tax breaks for investing.

What about in 5 years when that rent gets raised by $100-$150? What happens in 15 years.

and yes, if you want $5,000/month cash flow @ 10% CoC then you need $600,000 cash invested.

I agree with everything that @Alexander Felice said other than that you need $600k invested for $5k in cash flow. There are many strategies you can utilize to reach that type of cash flow on significantly less starting capital.

Originally posted by @Brian Garrett :

I agree with everything that @Alexander Felice said other than that you need $600k invested for $5k in cash flow. There are many strategies you can utilize to reach that type of cash flow on significantly less starting capital.

 I only said $600,000 @ 10% = $60,000/year and $5,000/month. Just to provide reasonable reference.

you can make better than 10% for sure, but 10% is still a good return ;)

Ok, thank you for the input! 

Originally posted by @Elsa M. :

Hi everyone, this may sound like a silly question but Brandon Turner has mentioned several times in his webinars on analyzing rental properties, that his goal is to at least profit $100 cash flow per unit (and 12% ROI). Doesn't $100 a month seem low? This doesn't motivate me, what am I missing here? Wouldn't it take A LOT of rental properties to have a cash flow of, lets say $5,000 a month?

Can someone please explain why $100 a month is actually pretty good?  

P.s. I do not have a rental property yet, looking to house hack a duplex soon. 

Thanks guys!!

The $100/door method only works for people who have high income paying W2 jobs and good credit. For the average joe person like most of us, you are correct, it isn't worth my time. Their way might be better, I don't know, but I don't have that type of money to invest.

You can find homes anywhere in the midwest (I see you are from IL) and cash flow much better than that by buying much cheaper houses.

I aim for at least 200 a month if you’re financing. 100 a month doesn’t get me excited at all. Even 200 is probably a bit light

Originally posted by @Derek E. :
Originally posted by @Elsa Mejorado:

Hi everyone, this may sound like a silly question but Brandon Turner has mentioned several times in his webinars on analyzing rental properties, that his goal is to at least profit $100 cash flow per unit (and 12% ROI). Doesn't $100 a month seem low? This doesn't motivate me, what am I missing here? Wouldn't it take A LOT of rental properties to have a cash flow of, lets say $5,000 a month?

Can someone please explain why $100 a month is actually pretty good?  

P.s. I do not have a rental property yet, looking to house hack a duplex soon. 

Thanks guys!!

The $100/door method only works for people who have high income paying W2 jobs and good credit. For the average joe person like most of us, you are correct, it isn't worth my time. Their way might be better, I don't know, but I don't have that type of money to invest.

You can find homes anywhere in the midwest (I see you are from IL) and cash flow much better than that by buying much cheaper houses.

Would you take $100/door if you had zero invested?

Point being, the dollar amount is secondary of importance to ROI

also, $100/door is usually based on projections including long term costs. These costs are reduced with efficient managements, and economies of scale. Rents also increase over time.

The dollar per door is not the efficient metric to measure for imo

 1. as I said above, it's not an accurate representation of profitability. and

2. gauging a good return is only possible when you consider opportunity costs, scalability, and repeatability.

Originally posted by @Alexander Felice :
Originally posted by @Derek E.:
Originally posted by @Elsa Mejorado:

Hi everyone, this may sound like a silly question but Brandon Turner has mentioned several times in his webinars on analyzing rental properties, that his goal is to at least profit $100 cash flow per unit (and 12% ROI). Doesn't $100 a month seem low? This doesn't motivate me, what am I missing here? Wouldn't it take A LOT of rental properties to have a cash flow of, lets say $5,000 a month?

Can someone please explain why $100 a month is actually pretty good?  

P.s. I do not have a rental property yet, looking to house hack a duplex soon. 

Thanks guys!!

The $100/door method only works for people who have high income paying W2 jobs and good credit. For the average joe person like most of us, you are correct, it isn't worth my time. Their way might be better, I don't know, but I don't have that type of money to invest.

You can find homes anywhere in the midwest (I see you are from IL) and cash flow much better than that by buying much cheaper houses.

Would you take $100/door if you had zero invested?

Point being, the dollar amount is secondary of importance to ROI

also, $100/door is usually based on projections including long term costs. These costs are reduced with efficient managements, and economies of scale. Rents also increase over time.

The dollar per door is not the efficient metric to measure for imo

 1. as I said above, it's not an accurate representation of profitability. and

2. gauging a good return is only possible when you consider opportunity costs, scalability, and repeatability.

I don't gauge investments on dollars per door, because I don't invest the way you guys do. My market does not really appreciate, but we have cheap houses with a strong rental market. So I have paid cash for all of my houses so far (only 5.) I look at deals strictly from a ROI point of view.

I understand why this doesn't work in most places, but this works great for places all throughout the Mid West. 

So what's your cash flow like? And ROI ?

$100 is weak... even $200-$300 is questionable....you need to aim higher...$400-$500 is optimal. don't do deals that produce $100...

I agree that $100 dollars a month shouldn't be the goal. One thing goes wrong at your place, and a whole year's worth of cashflow gets wiped out pretty quickly. I invest in Duluth, MN, which is a market that isn't THAT expensive right now and has allowed for some pretty solid cashflow on my first place. My 3-unit gets around 600/month, after expenses. So that's around $200 a door, but it's under one roof, one heating system, etc. Buying a bunch of single family houses at $100 a month cashflow, just doesn't sound very appealing. 

(763) 528-5120

Thanks everyone for sharing, much appreciated.  

Also, once the rent is paid, what do I do with the money from "variable landlord paid expenses" (from BP rental property calculator) like Cap Ex, repairs, vacancy etc..?  Do I open a new account with my bank and keep the money there, separate from my current account? 

yes thats a good idea. keep that money stacking in a separate account.
Originally posted by @Elsa M. :

So what's your cash flow like? And ROI ?

I just bought a house for $7,000 that already has a Sec 8 tenant living in the house with rent currently paying $441/month and room to increase a lot more. 

I don't use the 50% rule for myself because I manage the properties myself and I don't owe anything on them. For the sake of "rule" I will use the 50% rule for this house.

$7,000 purchase price

$441/month rent= $5,292/year Divide that by 2 for the 50% rule to get $2,646/year.

$2,642/$7,000= 37.8% ROI

Those are the numbers I look for, and those are the kind of cash flowing properties you can find all over the Mid West. I've been super lucky on the last 2 houses, but I typically look in the $15k range for a house and expect to rent it for at least $550/month. That puts you at a 22% ROI. I get really excited when I think I might have found a deal that is better than that. Some of them turn out to be complete dumps, but buying the last two houses for $7k made the time spent well worth it.

I currently own 5 houses with one still having work done to it so I only have 4 rented right now and I bring in $2,091/month starting first of Jan and I owe nothing on any of them. Gross rent will be $2,600-$2,700 when I get this other one rented in Feb. I save up the rent money to buy more houses. I have a Lowes Credit Card for small emergencies as well as around $3k or reserves. 

Keep in mind you will get little to no appreciation from most of these homes, but I have strategies that I use to try and alleviate this for the long term. I am young and plan to keep all of my properties for a long long time. Might even just pass them down to the kids/grandkids if the good Lord blesses me to live that long. 

Anyways, I hope I answered your questions. Have a great evening.

If you have the bandwidth - patience - hustle and hunger to search for deals and can spend many hours managing it locally - then definitely you can find better cash flowing deals - fix and flip and many other options - but ultimately you need to decide on how much effort you are willing to put into it and the kind of tenant profile you want to deal with.

derek.. I like your style! we invest in very similar ways..agree with everything you say

I'll keep that in mind, thanks guys..

$100 is $100 to me and $100 cash flow is $100 I didn’t have before and gets me $100 closer to my next deal. I do understand your point though... $100 isn’t anything to get all excited about and call your family and friends but like many others have said it really depends on the ROI

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