Single family returns? 12% over a 30 year period and $200/month?

[Tracy Thompson]

After reading The Book on Rental Property Investing three times and searching daily for five months, we believe that we are close to closing on our first single family home that is 700 square feet and in very good condition in a good neighborhood.  If everything works out, the purchase price is $35,000, the current long term tenant pays $450 monthly, insurance is $700 annually and taxes are $800 annually.  We are still not clear on what the minimum returns should be on a nice single family deal.  Does Brandon recommend a 12% per year or an average of 12% over a full 30 year period?  Additionally, does he also recommend an immediate minimum $200 cash flow per month on a single family home?  Finally, we could pay cash and not need to finance anything.  Thank you, Tracy.

[Eddie T.]

Tracy Thompson $450 a month rent in my opinion will not generate enough cash to support repairs and on going maintenance you should look for something that makes $8-900 a month.

Their is no answer to performance criteria you have to make your own but $200 a month cash flow is a good number to use. And as far as yearly return most investors want over 10% for the risk.

We have some articles here on maintenance reserves you may want to read.