$100 per door formula - Does it make sense to you?

[Gerardo E. Saldana]

Hi guys,

I need clarification on a phrase I hear often times around investing in rental properties.

Often times I hear the whole "your goal is to make $100 per door..." in podcasts, seminars, bigger pockets webinars, etc.

I understand that the whole idea of getting $100 per door is net - after paying the debt service, insurance, property taxes, property management, utilities, CapEx savings, repairs, maintenance, etc. However, even if we are already accounting for vacancy rates, getting $100 per door seems very risky. One troublesome eviction (they sometimes still happen even with great tenant screening) can crush many months worth of profit if your net profit is only $100 on that one unit.

So... have I been misunderstanding this phrase/suggestion this entire time? Is is the $100 per door also too low for you guys?

Also, how much do you aim to get as a minimum per door? What are the minimum GRM and CAP rates you like to see on your rentals?

[Steve Rozenberg]

@Gerardo E. Saldana

I think you are missing a big piece of the puzzle..4 pieces you are missing in my opinion

First of all. You need to understand and decide why you are even buying real estate... meaning what is your end goal.. final destination with this investment vehicle. Then you need to as best you can define what that looks like to you. Cashflow, net worth, value play, pass down to family etc..

Most people I meet and help tell me they want this for the future and they want the net worth, appreciation and Cashflow will give them when they are older and want to retire.

You make money 5 ways in real estate

1. Cashflow

2. Debt Paydown

3. Depreciation

4. Equity Capture

5. Appreciation

Most people that are new to this focus on Cashflow. But they tell me they want the money for down the road. That is a mixed signal and tells me they do not have well defined goals set.

Set your goal first, then create the strategy to achieve that goal.. it’s like the freeways you would take to get to your final destination on a toad trip (Disneyland).. the freeway is the strategy and the goal is Disneyland .

Unless you can clearly show people what your end goal is how can they give you advice on what is or is not the best strategy. And how can you know what is best.

Now of the 5 things when looking at a deal I train people that there is slim chance you are going to get all 5... ( that’s like me wanting to slam dunk a basketball... not going to happen as much as I want to)

If your goal is future net worth and Cashflow... why would you care what it’s doing today if you don’t need the money today and you are planting seeds for the tree of 20 -30 years from now. Make your buying decisions based on what it will be When u retire not what it is on day 2. That’s not investing that’s being unclear of your goal

We manage 1,000 houses for investors like yourself all over their world. Before I help them find a property I want them to really think and focus what is their goal and then tell me so I can go find a deal that matches that goal.

Spend time on the “why “... before you put money down on the “How”

Good luck