Cash Flow Per Door Expectations

[Kevin Sack]

I am actively seeking my first multifamily deal in the Hampton Roads, VA area. Am I off base for trying to get $150/door net cash flow on a quad that rents 700/month? That tends to put me at 80-85% of most asking prices with all my expenses and 20% down conventional financing.

Kevin

[Alina Trigub]

@Kevin Sack A lot depends on your local market. Brandon Turner uses $100/door as a base, but again you need to account for the local area conditions and demands. Ask some of the local investors here and through your local REI clubs.

[Kevin Sack]

@Brandon Turner thank you for speaking to my question during the Webinar tonight. Market is Hampton Roads, VA and cash flow as listed is 80-100/door/month with tenants paying utilities. The 15-20% discount I'm searching for will give me a 50% boost in cash flow. The local market currently has people paying close to full price, but I'm beginning to see repeat properties on the MLS with buyers falling through.

[Ernest Grindle]

@Kevin Sack A lot of MLS rehab properties end up falling through. I've bought two REO properties in the last year as the back up offer. You can find the cash flow you are looking for, but there is a lot more you need to factor in.

[Kevin Sack]

@Ernest Grindle can you be more specific with what factors you are referring to? My cash flow number is after PITI, maintenance reserves, 10% vacancy, 10% PM, and landscaping. This is my first deal so I'm making offers on properties that do not require major rehab...maybe paint and fixture updates at most.

[Ernest Grindle]

@Kevin Sack For example your purchase price impacts your down payment which will be a major factor in your cash on cash return which gives you the relative value of that monthly cash flow to you. Also depending on the neighborhood you are buying in you could have years of cash flow wiped away every tenant turn over. Since it looks like you are planning to hire a property manager, reach out to @Patti Robertson She has an excellent property management company and knows every neighborhood in Hampton Roads and could tell you what to expect.

[Dennis M.]

There’s Few good deals are on the mls . I look for 250-300 $ a door but will settle for no less than 200$ .the good deals are off market 

[Anthony Wick]

Dollars per door is like the 1% or 2% rule. A good starting point, but not the whole story of course. If I read your posts correctly, it appears you're only looking at $80-100 a door, with no utilities paid by you? That seems like a really low profit. Although, 10% vacancy also seems pretty high. But I don't know your area. I figure 3% vacancy in my area. I have been outbid on numerous multi families this summer because the numbers just didn't make sense to me. Not sure how some people are getting  cash flow. My guess is, they fake the numbers, to not include expenses or reserves for capex, maintenance, management, etc. 

[Kevin Sack]

@Anthony Wick you are correct, it does seem low so I suspect people are making money from buying when the market was lower and are trying to capitalize on the higher prices now. Depending on the source, I am seeing 7-9.5% vacancy in the area so I'm using 10% to be conservative.