Rental Property Investor · Nashville, TN · Member since 2019 · 15 posts · 8 votes
So I have 2 rental property with loans that I make about $450 each a month on after paying everything. Property prices in Nashville TN are too high to pull the trigger on another one. My question is how much money do you feel like you need to make on each property in order for it to be worth your time. Interested to see everyone answer.
@Nawzad Babiry For me there isn’t a hard fast rule when it comes to how much cash flow is worth my time. It really depends more on the purpose of the investment.
I passed on doing some deals this year with a partner because the cash flow wasn’t high enough (under $200 per month) but then, instead of doing the deals with my partner, I did the deals with my 3 oldest kids. They are young and they didn’t really need the cash flow. One of the properties cash flows about $100, the other just less than $200, and the third actually ended up cash flowing about $300 a month. But the reason the I bought each of them was because I was buying into about 40k equity on each of them, with little of my own money, and I plan to keep them for about 4 years and then sell them at which point there should be about 50k - 60k equity in each of them. Which should be enough to pay a good portion of college if they chose to go or some seed money into learning to invest themselves.
@Nawzad Babiry It depends on what you are in for. I have long term rentals and my plan is for my tenant to pay down my mortgage, so I am fine with the slow and steady. If I wanted more money over a shorter period of time, I'd take a higher risk approach and flip properties.
It all depends. $100 to $200 might not be worth my time. $200-$300 better. $300-$400+ is the ideal. This tends to give you a nice cushion for profit as well as setting money aside to use for any issues that arise with the property. This all the depends on the type of property. If you're looking at multifamily homes the sweet spot should be higher. For most people having any kind of money left over is a good thing since you're essentially getting the place for free while rents go up and it appreciates in value. It all depends on the kind of investing you're looking to do as well.
Well the property is pretty much priced on the high end, by it being a duplex the market rent will be half the mortgage, leaving me to pay the remaining considering if I'm going to occupy the other unit.
It depends on your goals, how much capital you have saved, and how fast you want to grow. If you are netting $450 after PITI, repairs, capex, vacancies, etc., then kudos to you in that market. For me, I'd rather take $200/mo in net cashflow, and use leverage to pull out another $XXX to reinvest. Everyone's strategy is different.
@CJ M. The 450 was before repairs. Just did my end of year report and one property had 785 for repairs and the other was a new property so it was a little more $2200 for repairs/updates.
I think the question to answer first is how you calculate your cash flow number. I factor in capex (even if I didnt have a cap expenditure that year), maintenance, estimated vacancy usually 8% of gross rents, and sometimes property management fee since managing a rental isnt free whether my time or someone else's.
Also, the cash flow amount should be related to house price. 400 per mo on a 400k house is not great.
@Nawzad Babiry For me there isn’t a hard fast rule when it comes to how much cash flow is worth my time. It really depends more on the purpose of the investment.
I passed on doing some deals this year with a partner because the cash flow wasn’t high enough (under $200 per month) but then, instead of doing the deals with my partner, I did the deals with my 3 oldest kids. They are young and they didn’t really need the cash flow. One of the properties cash flows about $100, the other just less than $200, and the third actually ended up cash flowing about $300 a month. But the reason the I bought each of them was because I was buying into about 40k equity on each of them, with little of my own money, and I plan to keep them for about 4 years and then sell them at which point there should be about 50k - 60k equity in each of them. Which should be enough to pay a good portion of college if they chose to go or some seed money into learning to invest themselves.
@Nawzad Babiry I want about $5k a year net. That is managing ourselves. That way we will still net about $4K a year when we turn them over to management someday.
However each deal is different. I might take less cash flow if I can buy well below market and have great equity.
Like was mentioned before, I calculate cashflow as NET. AFTER maintenance, capex, vacancy, and PM. You can probably find some good spreadsheets on google, or the BP analysis calculators. If you need one, direct message me. I just plug numbers into those, and it takes me less than 5 mins.
In OKC with 20% down 30 year conventional loans I see people shoot for $100-$200 a month. That's after factoring 5% vacancy, 5-10% for ongoing maintenance, 1% of the purchase price annually for taxes and 1% of the purchase price annually for insurance and lastly 8% of rent per month for property management.
Great answer. Other investors do it for tax purposes or for a place to live themselves rent free. Lots of ways to measure what you want out of an investment property.
@Nawzad Babiry I could echo everyones comments here and bottom line it is it depends on your strategy. How long are you planning on holding these units? If you budget $100/mo for repairs, you are netting $350/mo you are netting $4,200/yr. Can you raise the rents? What other surrounding areas outside of Nashville are you looking or would like to explore?