Cash Flow per Single Family Property

[Jordan Vires]

Greetings!

As a general rule how much should a single family property cash flow to make it a potential buy? I am familiar with the 50 percent rule often used on Multi Family properties. Is there a similar rule or guide for single family?

Thanks,

Jordan

[Account Closed]

Originally posted by @Jordan Vires:

@Account Closed

The extra cash flow is great of course. However long term profitability is the overall objective. What would be your advice for each scenario?

Thanks

Jordan

I've NEVER bought a property that cash flowed initially. Not in the 70's or the 80's or the 90's or 00's. However each of these properties doubled in value in about two years and rent increases average 6-7% annually.

I believe you give up some profitability for cash immediate cash flow. And if you are giving up rent growth and appreciation where will you end up over your holding period? Let's say you buy a SFR at $100,000 that cash flows $100. Sounds good? To sell that property with a 6% Realtor com mission it will take FIVE years of cash flow to pay the Realtor. Still sound good?

My point is that you need to look at profitability over your holding period and you need to make an educated guess on TWO major factors, 1. Rent growth and 2. Appreciation. Yet so many investors don't use or understand these metrics. Thinking that cash flow is profit is foolish.