Am I calculating Cash Flow incorrectly or did I buy bad deals?

[Account Closed]

I own a couple rental properties and only recently found the world of BiggerPockets! What a game changer.. I wish I had found it 4 years ago before I started buying lol.

Anyways, I read/hear about people cash flowing much larger amounts than I can imagine. I’m curious if I am calculating my cash flow incorrectly or if maybe I just made some bad deals... lol. Below are some details...

House A is a triplex and the monthly numbers are:

Income = $4000

Expenses = ($3577)

Cash flow = ~$423

House B is a duplex and the monthly numbers are:

Income = $3000

Expenses = ($2758)

Cash flow = ~$242

However, the expenses I’ve included are ONLY mortgage, property taxes & house insurance. I haven’t even considered the costs associated with:

— lawn maintenance (I do this myself)

— snow removal (I do this myself)

— vacancies (luckily, I haven’t had any yet)

— wear & tear %’s (mentioned in “The Book on Rental Property Investing”)

— and there are probably others I am forgetting..

^ if I were to add all those I’m sure I’d be losing money :( have I just been getting myself into “bad” deals?

[Evan Polaski]

@Account Closed, I try to stay positive that while these properties may end up costing you money, they aren't bad deals.  They are learning opportunities.  

Currently, you are making money, although many might consider your situation as buying yourself a job, not investing your money.  Thankfully, most first time investors look at things similarly to you, and being smaller properties they will trade based on the comps not the financials, when you do decide to sell.

Additionally, the market has been on a tear in most markets, so finding any property that cash flows with all expenses/reserves accounted and leverage above about 50% does not pencil out to a cashflow positive position.  At least from what I have seen.

While cash flow is key, appreciation is a very real piece of the overall returns of real estate, as are the tax benefits.  That being said, there are several pieces to consider when looking at new properties:
PITI
Management Fee: 10% of gross, typically
Leasing Fees: up to 8.333% typically
Lawn care/snow removal
Any utilities owner is responsible for
Vacancy Reserve: 5% equates to each unit being vacant for 1 month every other year
Wear and tear/turn over expenses
Capital Reserves: This is chronically see underestimated.  Based on my calculations, even if everything is new today, you would need to reserve about $250/mo to have enough to handle all the major repairs when they come up, i.e. HVAC in 10-15 years, Roof in 20-25 years, Kitchen remodels, exterior paint, floor refinish, etc.