Would you take 75%+ CoC with $200 monthly cash flow?

[CJ M.]

Hello,

My turnkey/rehabbed SFR properties have yielded CoC of approx. 75-100%+ (after refi). The average cash flow of all of them is just over $200 per month per door. I'd very much like to continue this strategy as I can grow very quickly, but is the cashflow too low? Obviously the higher the better, but I can possibly do 5-10 more of these type of deals soon. I like this approach however I want to make sure that when I'm planning my long-term growth goals, I'm being smart.

Thank you in advance.

P.S. For the purpose of this question, I'm calculating cash flow as (gross rent) - (PITI) - (25% allowances for everything else).

[Dan H.]

@CJ M.  I will be the contrarian but explain my rationale.  You can think about it or ignore it.

>I have 20-30% equity in all of my refinanced properties, I can't say I would even be able to sell them now for what I owe on them.

This means you currently have 0% equity.  I can see this if you refinanced immediately after a rehab, but a couple years of tenant wear and tear later but you indicate that you have been doing this a year so this is surprising.  I do not know how this could occur but that is not my issue with your situation.

My issue is the scalability in the no appreciation market.  If you can self manage 20 of these you are still only at $4K month.  That will likely be close to a full time job and not a good paying one.  Lets say you really want to work this and you can self manage 30 of these then you are up to $6K month,still not a good paying job.  Lets say you want to work very hard and can self manage 40 of these for $8K month, still not a great paying job.

I would pass on the initial question posed using the numbers provided.  $200/RE per month with no appreciation just will not provide the return I require for that level of effort. 

Maybe you can find properties with similar cash flow that have a little better appreciation in your area. Note 5% appreciation with an 80% LTV is a 25% return from the appreciation. Otherwise, you need to find properties with better cash flow.

Good luck