Who's Cash Flowing $850/Month on 1 Property?

Question

Hi! I know this is a pretty open ended question, but my goal is to reach $100,000/year cash flow through long term buy and hold rental properties over a 10 year time span. As of now, (I believe my strategy will change once I learn/network/educate myself more) I'd like to buy 1 property per year for the next 10 years. The goal is to find a property that has the potential to cash flow $10,000/year or ~$850/month. That's right, net $850/month after full mortgage payment, expenses, property management, cap ex, etc. If I can find 10 properties like this, I will reach the $100,000/year goal. I already have two properties like this under my belt (a duplex in a booming area and a 4 family in an up and coming area).

Who is out there doing deals on 1 property that cash flows $850/month, and what kind of deals are they? The two I have were hard to find and I'm not sure the MLS will get any easier finding these deals.

Who is out there doing deals on 1 property that cash flows $850/month, and what kind of deals are they?   The two I have were hard to find and I'm not sure the MLS will get any easier finding these deals.

Russell Brazil · Answer

I have two properties that meet this criteria. Also it isnt as hard to find this if you have a long term view, meaning that you are planning on future rent rises combined with future refinances to bring your payment down. I have one property I purchased 5 years ago that at the time, the rent netted me $500 a month over my PITI. Today after 5 years of rent increases couples with refinancing to a lower rate after 5 years of mortgage pay down I get $1100 a month after my PITI. Factorig in my repair costs Im probably right about $850 in free cash flow. That is on a SFH. I have a three unit property that I get about $1500 a month after PITI, and after factoring in repairs Im between $800-$900 a month. Again this is after a few years of rent increases and refinancing.

Time is your greatest ally in the buy and hold real estate game.

Max James · Answer

@John Chapman @Jd Martin

Here are the #'s I have for the first property:

Here are the inputs for Property #1:

Purchase Price:  $171,000

Interest Rate:  5.125%

Down Payment:  15%

Total Amount Brought to Closing (down payment and closing costs):  $22,875

Gross Rental Income When Bought:  $1,050

Gross Rental Income 1 Year Later:  $2,450

Monthly Water Bill I Pay:  $83

Property Management Fee:  Assuming 10%, but I manage this property for now, so for now it is 0%.  Need to include the 10% for long term growth.

Monthly Taxes:  $338

Monthly Insurance:  $90

To - Date CMA Price:  $210,000

What I'm calculating for my results are as follows:

Cash flow per year excluding property management: $10,541

Cash on cash return: 27%

Cap rate: 10%

2% rule: 1.43%

Cash flow per year including a future property manager: $7,601

Cash flow per year looking only at PITI: $14,762

Max James · Answer

Hey John, thanks for the response.  The experience I have is as owner occupied, one 85% LTV and one at 96.5% LTV (with FHA owner occupied).  The cash on cash returns as owner occupied is also extremely nice.

Max James · Answer

Thanks for the response Russell, I agree, if you keep in mind the rent raises and refinances, this becomes even more appealing.

I need to put together a legitimate business plan which I think will help me stay on track.  I just came across a good article on BP for this, https://www.biggerpockets.com/real-estate-investin...

Julie Moran · Answer

Russell is right - a lot of ways to skin this cat. Time is on your side if you purchase with long term view. Just rented a SFH for 2 year @ $2000 / mo. Have a $80k HELOC on the SFH( probably appraise for $230k to $250k now.) used the $80k HELOC to buy outright a 4-2.5 SFH in another state ( college town) rents for $1400+. Together they exceed your criteria but there was a ton of sweat equity getting there....

Vincent Crane · Answer

If you get a 4 plex in a really cheap place with high rents.

JD Martin · Answer

I'm not flowing that kind of money per door, but one thing I note is that you have one property that is doing that with 4 doors. That is only $200 per unit, which is really not that great unless the rent is $300 per door. If these are $700+ units that is a fairly tight margin.

John Chapman · Answer

Max, not trying to be mean, but your question is so open ended and vague as to make it almost impossible to respond.  Are you suggesting $850/month cash flow with a mortgage at 80% of ARV?  (Good luck with that.)  Are you suggesting $850/month cash flow with no mortgage whatsoever?  Even that can be difficult, in my opinion, as it requires you get gross rents of about $1700/month, which is pretty high for many areas of the country, including yours I would wager.  (Note, I'm assuming the 50% rule here, which I think is pretty valid as a rough estimate.)  Perhaps if you clarified and provided more detail, others could jump in and answer your question.

Chris Field · Answer

Without mortgages that's not to hard.

Who's Cash Flowing $850/Month on 1 Property?

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