Rental Calculator Question

[Scott Boddicker]

Looking to purchase rental properties in and around New Braunfels, TX.  Been listening to the podcast and seems like the big rule is to make $150+ a month per unit after all expenses (mgmt, repairs,vacancy,etc).  I'm confused because you can achieve this positive cash flow or great based on your amount of down payment.  Am I assuming a 20% down payment, no-or very low down payment, can anyone shed light on this for me?  

Thanks,
Scott

[Mike Krieg]

@Scott Boddicker Scott, what you need to determine is your required rate of return on the capital you invest on a property. For example, if you invest 50k into a property (down payment, inspection, closing costs, repairs, marketing, etc.), what annual cash flow do you need to feel good about your investment? This is really up to you. Generally, RE investors don't like single digit returns on RE. Given the work, time and risk involved you want to be well into the double digits. As for me, if I'm investing 50k, I want to see a cash on cash return of a minimum of 14%, with 20% being my target. That's just the cash return after all bills are paid. I'll take less of a cash return if I know the property brings a better tenant and has appreciation potential. This is the case with several props in New Braunfels right now. If you can achieve a 20% cash on cash return, then you're doing quite well right now. What juices your total return is the debt paydown and appreciation. So, I'd recommend getting the BP calculator and using that to evaluate deals. Be real about all the costs involved and you'll do fine.