What's your average net income per rental property?

[Tim Bee]

Hi, I am new to this forum.  My question is what is your average net income per door?  Excluding mortgages/loans.  

[Marcus Auerbach]

Hard to tell, but for small multi family in Milwaukee $200 per door is kind of an average number. This includes debt service and actual expenses. My portfolio is mostly higher price points per unit, so more capital invested and I'd like to see at least $500 when we put them in service. Over time these numbers tend to increase.

At $200 a door it takes a lot of units to make some money, which illustrates the importance of principal pay down, equity and appreciation when it comes to wealth generations. Some people never get there, here is a story. 

I run a lunch and learn series at our local association and one of my topics every year is: how to make a million with rental properties. It's a math exercise and you can use a BP calculator. Starting out with a normal W2 you can conservatively make a million in about 7-8 years, no more than 10. Most of that will be equity, not cash flow. After running everyone through the exercise I asked for questions and an older guy raised his hand and said he has been doing this for 25 years and has 30 doors and is no where near a million. 

Turns out he had accumulated a portfolio of duplexes in low income areas, has always done all the work by himself and is pretty much spending all of his cash flow and capex and repairs. The properties are not worth much, but they are old, so they require substantial capex. He had no significant principal pay down, a lot of the properties were bough cash. And very little appreciation, they were 50k then, they are 50k now.

Bottom line, cash flow is vitally important to keep your operation going, but it is not how you generate wealth in real estate. You need a a holistic view and IMO it's best to find a balance between cash flow and equity generation.