What's your average net income per rental property?

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What's your average net income per rental property?

Tim Bee
Investor · CA · Member since 2023 · 196 posts · 107 votes

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

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Marcus Auerbach
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
3y

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.

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  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    3y
    Quote from @Tim Bee:

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


     800 for SF, 

    0Reply
  • Abdul Jabar
    Member since 2021 · 20 posts · 2 votes
    3y

    @Will Conner Yes

    0Reply
  • Joshua Myers
    Rental Property Investor · Columbus, OH · Member since 2014 · 148 posts · 177 votes
    3y
    Quote from @Drew Sygit:

    @Tim Bee what information are you trying to get with this question?

    Many of the answers won't be of use to a newbie, due to:

    1) Property location, which will affect gross rent amounts. 
    There's a HUGE difference in average rents between California & Mississippi properties!

    2) Property Class, which will also affect gross rent amounts.
    For a specific location, Class A properties will have higher gross rents than Class B, which will have higher gross rents than Class C and so on.

    3) How long a property has been owned, which will affect rent - PITI
    A property owned for 5+ years will have benefitted from rising rents, while the PITI payment has changed little.

    You may be trying to find a number to use in projecting how many properties you need to replace your W-2 income. There's really no guaranteed formula to do this.



     #3 is the big one here, right. In 2018 I bought a duplex in a decent that netted $700/month and in 2019 I bought single family house in a great neighborhood that netted $400/month. 

    Flash forward to 2023 and they both net $1,200/month, but I pulled 80k from the single family in a refinance.

    Where you start is less important than the trajectory. I'm just starting to understand this.

    2Reply
  • Grayson Spittel
    Rental Property Investor · Wake Forest, NC · Member since 2017 · 128 posts · 131 votes
    3y
    Quote from @V.G Jason:
    Quote from @Grayson Spittel:

    @V.G Jason sure thing! Self managing and leveraging strong systems helps. One of my properties on the NC coast -

    Purchase Price: 640k

    Monthly mortgage, insurance, taxes - 3600/month or 43k/year. Pay cleaners ~12k in 2022. Subscriptions, software ~2k/year. 5% CapEx and 2.5% - I know the % look small, but our gross revenue is high - CapEx = 6k, maintenance 3k (we also renovate our properties upon purchase so maintenance and CapEx need is not as high). Flood insurance - $2500/year. Restocking and furniture upkeep - $2500/year.

    All in ~70-75k. Now, that’s with the disclaimer that we invest more into renovating and staging the property - ensuring that we stand out from the competition and also keep our monthly expenses low.

    We grossed $115k in 2022 from this property.

    I think my encouragement with this is to go outside of your local market, don’t be limited to the places you’re immediately familiar. I’m not operating in any market that’s over saturated or doesn’t have a long history of a strong rental market. Also, even with the recent decrease in property values, or the slowing of appreciation, this property still just appraised for 800k at the end of 2022.


    Incredible, great job. I hope the occupancy stays high and the regulations don't change, those are your only downsides. If you're standing out among the competition, the former does not appear to be an issue though. So well done.

     thanks brother! I agree - I'm a huge proponent on either (1) finding a market with a lot of regulations defined, and establishing yourself within that system or (2) in markets with decades of rental demand and supply. So far we've been targeting the latter. All the best!

    0Reply
  • Alan AsriantsBusiness Member
    Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
    3y

    @Tim Bee usually I am trying to find buy and hold deals that are returning 10%+

    My expenses are usually minimal - public electric, RE taxes (PHILA taxes aren’t super high), insurance.

    Tenants are responsible for the rest: water, landscaping, snow removal, utilities, etc.

    I invest in small multi family usually duplexes, so having the tenant responsible for those items is not unusual.

    Goal is to find long term tenants that treat the place like their own. I believe with small multi family like duplexes this is possible. With larger multi families would be hard to have tenants responsible for trash, snow, water, etc, making your expenses larger per unit.

    So if I have a 1700/m unit with two units I am at 3400 a building with about 458-500/m in expenses

    [email protected]267-767-0111
    Alan Asriants - New Century Real Estate 590 Reviews
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  • Michael Weigum
    Real Estate Agent · Santa Rosa Beach, FL · Member since 2019 · 112 posts · 116 votes
    3y

    @Tim Bee I go along more with @Grayson Spittel. My STR's average 20% cash on cash and I target $1500 net per month per door. I had a long term rental and I was making $1000 per month. I'm looking to turn my primary into a long term rental and it will be a little above $1000 per month net.

    When I first started listening to Brandon on here and I heard him say $100 - $200 and that made me cringe. That's not worth my time.

    Now that I understand all the other benefits of real estate, I see why people do it. Depreciation is a beautiful thing. However, my personal target is $1000 - $1500 per month net.

    Good Luck!

    2Reply
  • Jay ThomasPro Member
    Real Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
    3y

    It looks like investing in Real Estate is paying off! With the new tenant moving in next week, you will have an additional $900 coming in each month, which is a great addition to your already impressive income of $800 from your other real estate investments. You're clearly making smart decisions when it comes to Real Estate and it's really starting to show! Keep up the great work and keep growing your Real Estate portfolio. Congratulations!

    [email protected]832-889-5607
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  • Patrick Britton
    Ann Arbor, MI · Member since 2014 · 1k+ posts · 997 votes
    3y

    According to excel I should be averaging about $450 net per property per month. This never, ever happens. Real estate rentals to low-income people was a bad investment.  Rent to the rich.  

    0Reply
  • Susan Maneck
    Investor · Jackson, MS · Member since 2014 · 1k+ posts · 769 votes
    3y

    Mississippi investor here. It is rather difficult to answer this question because I paid cash for most of my properties, but I house I bought for about 30K now rents for $900, your not likely to find those deals right now. 

    0Reply
  • Tim Bee
    OP
    Investor · CA · Member since 2023 · 196 posts · 107 votes
    3y
    Quote from @Susan Maneck:

    Mississippi investor here. It is rather difficult to answer this question because I paid cash for most of my properties, but I house I bought for about 30K now rents for $900, your not likely to find those deals right now. 

    With a gross rent of 900/mo what's your average net?  Thanks
    0Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    3y
    Quote from @Patrick Britton:

    According to excel I should be averaging about $450 net per property per month. This never, ever happens. Real estate rentals to low-income people was a bad investment.  Rent to the rich.  


     I'd go somewhere in between.  Many of the rich watch their money closely.

    0Reply
  • Susan Maneck
    Investor · Jackson, MS · Member since 2014 · 1k+ posts · 769 votes
    3y
    Quote from @Tim Bee:
    Quote from @Susan Maneck:

    Mississippi investor here. It is rather difficult to answer this question because I paid cash for most of my properties, but I house I bought for about 30K now rents for $900, your not likely to find those deals right now. 

    With a gross rent of 900/mo what's your average net?  Thanks

    How do you calculate gross profit for a property I paid cash for? Probably after insurance, taxes, property management and repairs $500 a month or more. 


    0Reply
  • Tim Bee
    OP
    Investor · CA · Member since 2023 · 196 posts · 107 votes
    3y
    Quote from @Susan Maneck:
    Quote from @Tim Bee:
    Quote from @Susan Maneck:

    Mississippi investor here. It is rather difficult to answer this question because I paid cash for most of my properties, but I house I bought for about 30K now rents for $900, your not likely to find those deals right now. 

    With a gross rent of 900/mo what's your average net?  Thanks

    How do you calculate gross profit for a property I paid cash for? Probably after insurance, taxes, property management and repairs $500 a month or more. 


    Yea calculating net profit is really easy. You just take your gross monthly rent. Subtract average damages, prop taxes, insurance, probable vacancy, income taxes, HOA if any. The money left over is called net income. What you paid to purchase this property would not be part of the equation for this particular question.

    0Reply
  • Susan Maneck
    Investor · Jackson, MS · Member since 2014 · 1k+ posts · 769 votes
    3y
    Quote from @Tim Bee:
    Quote from @Susan Maneck:
    Quote from @Tim Bee:
    Quote from @Susan Maneck:

    Mississippi investor here. It is rather difficult to answer this question because I paid cash for most of my properties, but I house I bought for about 30K now rents for $900, your not likely to find those deals right now. 

    With a gross rent of 900/mo what's your average net?  Thanks

    How do you calculate gross profit for a property I paid cash for? Probably after insurance, taxes, property management and repairs $500 a month or more. 


    Yea calculating net profit is really easy. You just take your gross monthly rent. Subtract average damages, prop taxes, insurance, probable vacancy, income taxes, HOA if any. The money left over is called net income. What you paid to purchase this property would not be part of the equation for this particular question.
     

    Well, normally your mortgage payment would be subtracted as well but when you pay cash that changes things dramatically. 
    0Reply
  • Tim Bee
    OP
    Investor · CA · Member since 2023 · 196 posts · 107 votes
    3y
    Quote from @Susan Maneck:
    Quote from @Tim Bee:
    Quote from @Susan Maneck:
    Quote from @Tim Bee:
    Quote from @Susan Maneck:

    Mississippi investor here. It is rather difficult to answer this question because I paid cash for most of my properties, but I house I bought for about 30K now rents for $900, your not likely to find those deals right now. 

    With a gross rent of 900/mo what's your average net?  Thanks

    How do you calculate gross profit for a property I paid cash for? Probably after insurance, taxes, property management and repairs $500 a month or more. 


    Yea calculating net profit is really easy. You just take your gross monthly rent. Subtract average damages, prop taxes, insurance, probable vacancy, income taxes, HOA if any. The money left over is called net income. What you paid to purchase this property would not be part of the equation for this particular question.
     

    Well, normally your mortgage payment would be subtracted as well but when you pay cash that changes things dramatically. 

    Here is my question from the topic section of this forum

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

    Hope this helps.

    0Reply
  • Susan Maneck
    Investor · Jackson, MS · Member since 2014 · 1k+ posts · 769 votes
    3y

    Ah, okay. I missed the part about loans. 

    0Reply
  • Sam C.
    Lehigh Valley, PA · Member since 2016 · 144 posts · 91 votes
    3y

    People posting numbers for a return vs a percentage would concern me. 

    0Reply
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