Maximizing monthly cash flow per unit

Investor · Long Island · Member since 2023 · 36 posts · 21 votes

We started this journey 2 years ago - We just pulled off our best deal yet!

After going through the ups and downs of dealing with Section 8 Landlording, we finally learned how to maximize our profit per door. We focused on where we went wrong with the first couple of homes we purchased. We always chased around $500-$600 a month in profit per door.

We didn't think it was possible but we got over $1100 in net cashflow on 1 property. Mainly focusing on our location while also keeping the total cost of the homes in mind. Finally we purchased a home for $130k (Sales price) with a mortgage of $950. The home was submitted with PHA (Section8) and the rent came back at $2,075 (fully guaranteed).

With the failures we endured in the past - we were able to take out original goal of $500-$600 per door and were able to double that with just 1 door.

The journey continues and now we know where to direct all of our focus!

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Stuart UdisPro Member

Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes

Never heard of a voucher tenant being responsible for maintenance and repairs, rental licensing fees, lead testing upkeep, cap ex, reserves, book keeping and tax prep......and even if you self manage, it takes up your time and should be treated as an expense because its taking away from your ability to earn income elsewhere.

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Rod HanksBusiness Member
Insurance Agent · Dallas, TX · Member since 2013 · 743 posts · 462 votes
1y
Congratulations! $1000 per door is a grand slam out the parking lot home run!
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Paul Lucenti
OP
Investor · Long Island · Member since 2023 · 36 posts · 21 votes
1y
Quote from @Rod Hanks:

Congratulations! $1000 per door is a grand slam out the parking lot home run!

Thank you sir
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Stuart UdisPro Member
Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
1y
@Paul Lucenti You are saying the rent collection is $2,075/m, the mortgage is $950/m and cash flows $1,100/m. Does this property have no insurance, property taxes, utility bills, management or maintenance costs? I am not following your math.
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Paul Lucenti
OP
Investor · Long Island · Member since 2023 · 36 posts · 21 votes
1y
pretty simple - Insurance and property taxes are included in the mortgage and the utilities are paid for by tenant. We manage the property -
2 Reply
Stuart UdisPro Member
Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
1y
Never heard of a voucher tenant being responsible for maintenance and repairs, rental licensing fees, lead testing upkeep, cap ex, reserves, book keeping and tax prep......and even if you self manage, it takes up your time and should be treated as an expense because its taking away from your ability to earn income elsewhere.
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- Paul Lucenti
  OP
  Investor · Long Island · Member since 2023 · 36 posts · 21 votes
  1y
  @Stuart Udis rental license fee is like $40 for the year. Lead test cost me $140 and it lasts for 2-4 years not exactly sure how long
  
  "it takes up time" she's called me once in 4 months and i made a call and got it fixed. No point in paying someone to do a simple task (yet) so no it's not taken time from me - well maybe 5 minutes.
  
  repairs will come and we will fix, but that's why we do our due diligence before we buy so we aren't walking into major repairs
  2 Reply
Matthew Irish-JonesBusiness Member
Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
1y
@Stuart Udis yes sir. It all cash flows like a gold mine until the roof needs to be replaced, the main line goes, or you get your first turnover bill and need to upgrade a kitchen.

Variable cost and CapEx are where I see most investors make errors on their Pro Forma. Self managing C class units can be very deceiving. The bill for a roof on a $60,000 house is the same as a $500,000 house, however, the % of Revenue on each are vastly different.
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- Paul Lucenti
  OP
  Investor · Long Island · Member since 2023 · 36 posts · 21 votes
  1y
  @Matthew Irish-Jones first month in another unit the roof caved - cost $2500.
  
  Just don't be an idiot with your finances and it'll all work out.
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Stuart UdisPro Member
Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
1y
@Matthew Irish-Jones You couldn't have said it better. Certain cap items is fixed or pretty close to fixed whether you are buying a $60K house vs. a $500K house in the same market. I get a good laugh when I read new investors post about buying C/D neighborhood ~~assets~~ liabilities and announce to the world how well they perform in the first few years focused solely on cash flow.

Meanwhile we have @Paul Lucenti posting a few days ago wanting to raise money from others to scale his section 8 rental acquisition business. Nobody who has been purchasing section 8 rentals for 2 years and doesn't understand the costs associated with operating these assets sustainably has any business investing other's money. Nothing points to this better than claiming the property cash flows $1,000/m relying on rent collection and debt service/taxes/insurance while responding to my question about other operating expenses/reserves with: "repairs will come and we will fix, but that's why we do our due diligence before we buy so we aren't walking into major repairs".
The problem is you can't afford to properly make repairs when you are dealing with the lower tier properties and go with the cheapest bids doing nothing but putting duct tape on issues that will become recurring or believing you are making the repairs correctly but use inferior labor and materials because its all the property can absorb cost wise.
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Paul Lucenti
OP
Investor · Long Island · Member since 2023 · 36 posts · 21 votes
1y
I love people like you Stewart - you give me motivation.

I do have 1 question - how long have you invested in these areas to where you are so well versed in it? Because it seems like you've been down this road before and have failed - if that's the case say that so I can avoid certain things.
1 Reply
Allan C.
Rental Property Investor · Member since 2018 · 829 posts · 811 votes
1y
It's not that Stu has tried and failed with this asset class, but he is pointing out that you have very preliminary understanding of investment principles and should look to expand your knowledge before being accountable for OPM.

the fact that you're confusing mortgage payments with T&I impound is indicative. Cash flow also isn't a monthly metric but rather annual at best.

But I respect the passion and you seem to have the motivation to keep growing. Advice is for you to do this for another 5+ yrs to go through some real ups and downs to get a better sense of realized cash flows (net turnovers, evictions, capital events, etc).
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- Paul Lucenti
  OP
  Investor · Long Island · Member since 2023 · 36 posts · 21 votes
  1y
  @Allan C. Thanks Allan - I understand. I know mortgage payments and T&I are different - but at the end of the month they are grouped into 1 overall total cost. So I look at it from a monthly cost basis - taxes change as years go but for now this is what the deal is.
  
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Stuart UdisPro Member
Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
1y
Is this the same @Paul Lucenti who responded with "Thank you - I guess we will find out". when I was critical of your posts a few days ago about raising money to scale your business by investing in section 8 rentals? Now you are telling me my critique of of your business model "gives you motivation". What's your pitch to investors? Give me money so I can prove some guy on BiggerPockets wrong? You're merely proving my point that you have no business raising outside capital to invest in real estate.

And to answer your question, I've owned section 8 rentals along with lots of different asset types. I've had some investments perform better than others but section 8 rentals were the one that were most challenging to sustainably operate and my worst performers over an extended period of time. Could I have scaled a section 8 business and had success? Sure, but success is relative. I've found other investment strategies to be far more profitable and far less demanding to operate.

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Paul Lucenti
OP
Investor · Long Island · Member since 2023 · 36 posts · 21 votes
1y
We have 4 outside investors, all working out very well. So since we have found good results through certain deals I thought reaching out on here could help us expand.

Every deal is different, most of our investors want anywhere from 12%-14% on their money over 4-6 years. Some want equity which is a little tougher to structure but possible. But since the cash flow is high on these there's a lot of room for us to pay them monthly and still have left over for any operating expenses. You point out maintenance and reserves, we don't touch any money from the business. Everything gets reinvested. When I shared the success story that's all that was - maintenance of course you have to factor in but on the raw deal over 4 figures in net cash flow is very good (at least to me).

I appreciate you telling me your experiences with it, I understand there are different aspects of real estate. Some love equity some love cash flow some love both. I'm definitely more cash flow for now but as it adds up we are going to be investing in other opportunities. This is just the foundation.

Maybe I misinterpreted what you were saying - but it came across as you were saying it's impossible to scale a business like this. All I was saying was that it is not, it can be very profitable and lead into great opportunities down the line.

And like you said, success is relative. Your definition of success is probably very different then mine.
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Stetson Oates
Member since 2024 · 65 posts · 63 votes
1y
As a suggestion, when you refer to net cashflow, I would include maintenance, vacancy, and repairs. If not I fear you will be caught in a cash flow issue once you have a vacancy. Section 8 would tend to carry higher repair and as a result, additional vacancy.
1 Reply
Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
1y
Quote from @Stetson Oates:

As a suggestion, when you refer to net cashflow, I would include maintenance, vacancy, and repairs. If not I fear you will be caught in a cash flow issue once you have a vacancy. Section 8 would tend to carry higher repair and as a result, additional vacancy.
OP’s definition of cash flow is rent minus piti. No maintenance/cap ex, vacancy, PM, book keeping, asset protection, miscellaneous, etc.

his actual cash flow when properly allocating for sustained expenses is a fraction of his advertised cash flow. In addition, the book keeping and legal involved with a syndication process is greater than if partners are not involved. These involve additional costs.

I am not saying that there definitely is negative cash flow, but I will say not including known expenses is providing a misleading cash flow estimate.

OP has less than 3 years experience and it appears he has no mentor, he will learn by taking some setbacks. It may work in the long term but can be a painful process.

i wish the OP the best and i believe he can benefit by recognizing the value in the various responses but seems unwilling. He may have to suffer more pain than necessary.

best wishes

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Mark Cruse
Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes
1y
Yes, there will be more expenses above what's mentioned here but if this is done properly it can be kept to a minimum. It appears some of you are giving off negative shade here. I don't know if this is a newbie but if so, they are ahead of the curve in regard to most mid-level investors. It appears they quickly know how to adjust and select the right property. With $1100 in cashflow, a skilled investor who understands the section 8 program can kill the game. I think because so many do not have the skill set to navigate this community, they feel no one else can win. I feel the investor is off to a great start. Its all a learning process. if they can continue to pivot and make adjustments, when necessary, they will do wonderful. Many of the section 8 tenants I've had give me little to zero problems and take care of the place as though it's their own. Imagine having the majority of the section 8 tenants, with that steady and reliable income.
2 Reply
- Paul Lucenti
  OP
  Investor · Long Island · Member since 2023 · 36 posts · 21 votes
  1y
  @Mark Cruse thanks mark - that's the vibe I was getting as well, super negative and not informative (from one person) This was a success story just on raw numbers - there are obviously more expenses, but some took it and seemed to take it at face value which did leave me to get defensive which I shouldn't have.
  
  side note - knowing how to communicate and navigate this community seems to be the key. That's a great point
  1 Reply
Matthew Irish-JonesBusiness Member
Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
1y
Quote from @Mark Cruse:

Yes, there will be more expenses above what's mentioned here but if this is done properly it can be kept to a minimum. It appears some of you are giving off negative shade here. I don't know if this is a newbie but if so, they are ahead of the curve in regard to most mid-level investors. It appears they quickly know how to adjust and select the right property. With $1100 in cashflow, a skilled investor who understands the section 8 program can kill the game. I think because so many do not have the skill set to navigate this community, they feel no one else can win. I feel the investor is off to a great start. Its all a learning process. if they can continue to pivot and make adjustments, when necessary, they will do wonderful. Many of the section 8 tenants I've had give me little to zero problems and take care of the place as though it's their own. Imagine having the majority of the section 8 tenants, with that steady and reliable income.

The issue is his definition of cash flow. By my definition he does not have $1100 in cash flow.
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Mark Cruse
Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes
1y
Quote from @Matthew Irish-Jones:

Quote from @Mark Cruse:

Yes, there will be more expenses above what's mentioned here but if this is done properly it can be kept to a minimum. It appears some of you are giving off negative shade here. I don't know if this is a newbie but if so, they are ahead of the curve in regard to most mid-level investors. It appears they quickly know how to adjust and select the right property. With $1100 in cashflow, a skilled investor who understands the section 8 program can kill the game. I think because so many do not have the skill set to navigate this community, they feel no one else can win. I feel the investor is off to a great start. Its all a learning process. if they can continue to pivot and make adjustments, when necessary, they will do wonderful. Many of the section 8 tenants I've had give me little to zero problems and take care of the place as though it's their own. Imagine having the majority of the section 8 tenants, with that steady and reliable income.

The issue is his definition of cash flow. By my definition he does not have $1100 in cash flow.

I'm just presenting an alternative perspective. Maybe the OP doesn't perceive it this way, but it seems like people are trying to trample over the accomplishment, insinuating he is some rookie who is fooling himself. Maybe not meant to sound that way but it comes off like that to me. At this point, they are doing most likely what others here didn't think was possible, and probably something they failed at.
Not talking about you personally. It's in general.
1 Reply
Matthew Irish-JonesBusiness Member
Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
1y
Quote from @Mark Cruse:

Quote from @Matthew Irish-Jones:

Quote from @Mark Cruse:

Yes, there will be more expenses above what's mentioned here but if this is done properly it can be kept to a minimum. It appears some of you are giving off negative shade here. I don't know if this is a newbie but if so, they are ahead of the curve in regard to most mid-level investors. It appears they quickly know how to adjust and select the right property. With $1100 in cashflow, a skilled investor who understands the section 8 program can kill the game. I think because so many do not have the skill set to navigate this community, they feel no one else can win. I feel the investor is off to a great start. Its all a learning process. if they can continue to pivot and make adjustments, when necessary, they will do wonderful. Many of the section 8 tenants I've had give me little to zero problems and take care of the place as though it's their own. Imagine having the majority of the section 8 tenants, with that steady and reliable income.

The issue is his definition of cash flow. By my definition he does not have $1100 in cash flow.

I'm just presenting an alternative perspective. Maybe the OP doesn't perceive it this way, but it seems like people are trying to trample over the accomplishment, insinuating he is some rookie who is fooling himself. Maybe not meant to sound that way but it comes off like that to me. At this point, they are doing most likely what others here didn't think was possible, and probably something they failed at.
Not talking about you personally. It's in general.

We were all new at one point. I applaud him for taking the hardest step, the first one. However, I made the error early in my career of thinking I was generating way more cash than I thought I was. I would have appreciated someone pointing out how to more accurately project cash flow.
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Shawn AckermanPro Member
Real Estate Entrepreneur · Mid West, East Coast · Member since 2015 · 3k+ posts · 1k+ votes
1y
@Paul Lucenti Sounds like an amazing deal man! and I also rent to voucher holders in the Milwaukee market. However I like to run my numbers conservatively and account for cap ex, vacancy, maintenance reserves 10/5-7/5-7% respectively. Mgt, Landscape/Snow, tax, insurance, utility then debt service. I doubt after factoring all of the expenses/reserves you'd be at $1100 per month in Net Cash Flow but still way ahead of the expenses nonetheless.
We have a duplex bringing in $2800 per month-expenses $1253-debt- $740(P/I) and netting us $807. Well that is when the lower tenant feels like paying her 20% portion of the rent of $240 per month lol!
Keep up the great work and again sounds like an awesome deal. Congrats
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- Paul Lucenti
  OP
  Investor · Long Island · Member since 2023 · 36 posts · 21 votes
  1y
  @Shawn Ackerman thanks Shawn - I'll add that into my numbers thanks for the tip. Also great deal as well for you
  
  How is it dealing with voucher holders in duplex's? I've heard very mixed opinions so really unsure about them but definitely interested.
  0 Reply
Mark Cruse
Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes
1y
Quote from @Paul Lucenti:

@Shawn Ackerman thanks Shawn - I'll add that into my numbers thanks for the tip. Also great deal as well for you

How is it dealing with voucher holders in duplex's? I've heard very mixed opinions so really unsure about them but definitely interested.

Not sure why the process would be any difference for a voucher holder in a duplex or single family. Here you will get a vast array of perspectives. Most will be negative because they have had bad experiences with it. Many have zero experience with the community and don't understand the culture. This is key to being successful. If you understand how to screen very well, communicate with them respectfully and can somehow understand the dynamics of the community, you will be ok. Have to really know what is going on with the areas and how to mitigate things you may not have to often in other rentals. Either way, there are several people who make this work all the time. If you need advice it's great to talk to people who have been successful at it. I've heard people in this forum suggest that you treat them all like animals. I met up with an investor from here back in the day and he told me to put animal cages in my rentals. Some here will tell you all tenants hate their landlord so factor that into your actions. I would advise against anything like that and again, talk to the ones who are doing it successfully.
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Kevin Eun
Member since 2024 · 6 posts · 4 votes
1y
Great start Paul! I laughed about putting animal cages in rental until I realized someone actually must have meant it. Hope you kill it man! I am such a novice and only just starting my small multifamily property investment... very "boring" compared to what you are doing!
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Wale LawalBusiness Member
Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
1y
@Paul Lucenti
Your journey shows the power of learning from past experiences and refining your strategy. By targeting better locations, leveraging Section 8 for consistent cash flow, and balancing low acquisition costs with high guaranteed rents, you've achieved impressive results like $1,100 in net cash flow on a single property. To scale, replicate this winning formula in similar markets, optimize operations for Section 8 tenants, and consider networking with like-minded investors to uncover new opportunities and partnerships. Keep building on your success, and your story will continue to inspire others!
Good luck!
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Shawn AckermanPro Member
Real Estate Entrepreneur · Mid West, East Coast · Member since 2015 · 3k+ posts · 1k+ votes
1y
@Paul Lucenti Not too bad dealing with multiple tenants in the same dwelling. For the most part my tenants get along. My manager is largely responsible for that. Also the screening process is very important. Just because someone has a voucher doesn't guarantee we will accept them. There is something called CCAP in Milwaukee where with the tenants name and DOB we can look up and civil/criminal court cases. If they pass that smell test and fit our other criteria then it's usually a good fit. We can't make people clean up after themselves and keep things as we would but the day to day dealing with voucher tenants is not the worst. I also have camera's on many of my multi-families so that helps(only on exterior)
Keep pushing man!
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