Template for figuring out path to cash flow goal?

Question

Let's say I have a goal to generate X amount of monthly cash flow by X year, and I'm trying to figure out different scenarios to get to that goal.

Can you recommend any useful tools, spreadsheets, blog posts, or forum discussions to help figure that out?

Thanks so much!

Andrew Holmes · Answer

@Carmen Sognonvi

@Kelcy Smith @Alex Deacon Account Closed

I think all these guys have great suggestion.

I don't know your numbers for Brooklyn, NY.

But here in the Chicago area we always try to suggest to investors build your plan for cash flow on the following basics.

1. Your Goal for cash flow

2. Area Selection

3. Property Type (SF, Townhomes, Duplex, 2-4 flats, Multi Units etc)

4. Cash flow per per property or per door

5. Equity position after rehab in each

6. Pay Off Schedule of loans if you want be debt free.

Assuming a scale for A being Best and D being the worst neighborhoods

Buy cash flow properties in ideally B, B- To C+, C areas with good economics jobs etc.

So if someone says they need $ 8000 in cash flow per month

We would build the model as follows. (These numbers work in my market so I am just using those numbers)

$ 8000/ $ 800 = 10 properties   (***Assuming $800 - 900 Per door for paid off rentals)

Multiply that by a factor of 1.2 so you need 12 properties to be safe.

So for it to be considered a great property by our standards. After rehab there needs to be 25% equity position at the start.

In our market you can produce at $ 400 - $ 450 cash flow per month with existing mortgage.

So if the goal is 12 properties. We would say 3 year one and 4 year 2 and 5 in year 3.

Then take all the cash flow from all 12 units and start attacking mortgage number 1. Once that is paid off then go to property number 2, 3 and so forth.

Just understand on paper it's easy to draw a model and make everything perfect. In real life things happen but your over all goal should remain the same.

The reason I used 12 properties is so that you have 2 extra because even with all the tenant screening and 2 years leases and every attempt something will under perform so you have a buffer with 2 properties.

Hope that helps.

Eric Anderson · Answer

@Carmen Sognonvi

Thank you very much for asking this question.  I've been stuck on this.  It is important to me for two reasons: 1) I need to see the numbers so I know how to measure I am moving forward or backward, or just standing still.  2) these are the details I want to share with real estate professionals as I build my network of like-minded people.  Again, my friend, thank you so very much

@Andrew Holmes

I printed your model and put it next to my white.  I use it as the foundation I'm building.  Excellent inputs.  Thank you very much!!!

Nichole Stohler · Answer

Hi @Carmen Sognonvi,  completely relate to where you are coming from.   I also like to plan, set goals and track on a monthly and yearly basis.    What we've done is figure out the annual cash flow number we need in order to meet our goals and then back into how many units/houses/etc. we'd need and then target some type of growth per year to meet that goal.

We are pretty conservative with these numbers and generally use $100 per unit per month as "take-home".   Granted, the numbers can be higher and there are opportunities to improve but that just means we reach our overall goal faster :)

What kinds of properties do you have so far?  Or thinking of buying?

Joe Villeneuve · Answer

Establish your financial goals, and be specific. They should be based on eliminating all your personal debt, and covering all your monthly bills.  Reverse Engineer from your goals to where you are now in funding, knowledge, time available, team avialable, etc...

Now turn around and follow the breadcrumbs.

The above will establish the template, and a series of measurable Milestones (which is really just your financial goals split up into packages).  The steps between the milestones are the individual deals you execute.  Keep in mind that each entrance into these steps should be executed and planned with the exit, taking the next entrance, into consideration.  Treat each step as a series of step, not stand alone steps.

The criteria for each milestone establishes the profiles for each step (deal) within that milestone range...which, then establishes the profile forthe markets you needto find to invest in.

Clear as mud?

Andrew Holmes · Answer

@Eric Anderson

Thank you the kind words. Wish you the best.

David Garrison · Answer

Hi Carmen,

I'll share what I'm doing while I'm getting ready to buy the first property.

I've created a business plan and have set out goals that I believe are realistic based on my income. I have it saved on my computer and I revisit it every few months. The plan started with me working toward paying off debt, then it was based all around savings, and now I'm getting ready to buy the first property (hopefully in the next few months).

I've outlined what my goals are for each year and I've based this solely on my income. My fiance's income will be an added bonus that will accelerate the plan but she's just getting back to work after taking care of our daughter the passed 6 years. I've used rental figures that I've purposely placed below what I expect to actually rent units for to add another layer of conservatism to my plan. I know the rent will be higher but I'm not banking my entire plan on a perfect scenario.

My goals are based on a 10 year plan (starting from the first purchase) as a reasonable time frame and purchasing 1 property a year at the beginning. I've taken an ultra conservative approach to start and the plan accelerates around year 5. I purposefully did this because I assume I will learn some hard lessons through the first part of the plan.

I constantly reference my plan and adjust things accordingly based on future circumstances. I think getting your plan written out is an incredibly important factor. As I continue reading and learning more, I make adjustments.

The adage "Failing to plan is planning to fail" is one that I keep in mind regarding this (or any) process. For me, having the written plan is a concrete template I can follow. Also, putting together my plan has come almost entirely from reading biggerpockets and other real estate books as well as these forums. Devour the information and see how it will fit into your written plan and make adjustments accordingly.

Jeff B. · Answer

IMO, don't become OCD on goals.  Yeah they give us something to work towards. But if we don't mind the store ( the daily operations, tenant selection, site facilities maintenance) and only work on expansion of the portfolio, the sky can come crashing down.

There's an old adage: the longest journey begins with just a single step.

Too many here at BP want to start in the hundred yard dash (the most difficult food race) without having taken the single step.

Carmen Sognonvi · Answer

Thanks for the vote of confidence, gentlemen, but I do know how to use a pen, paper and calculator. I can even rock an Excel spreadsheet, believe it or not.

I've been gone from BP for a couple years and noticed the BP team has been hard at work building a lot of cool new tools for members.

So I thought it would make sense to check if there's something pre-existing for this purpose. If not, I can figure it out myself.

Account Closed · Answer

Decide which kind of investor you want to be (SFR, Commercial, Land, Tax Liens, HML, Multi-Family, Notes, Fix & Flip, Buy & Hold, “Subject To”, apartments, duplexes, assisted living, REOs, Foreclosures, Short Sales), etc.. Decide how much money you have access to, & the zip codes, city or state you want to focus on. That will determine the next step. Outline where you want to be in five years. Put it all in writing. Start working your plan.

Template for figuring out path to cash flow goal?

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