How much monthly cash flow should you get on a rental property?

[Dr. Jordan E Smith]

I have been reading a lot of books on rental property investments and have heard varying opinions on what qualifies as a "good" rental property investment based on monthly cash flow. 

I've read anywhere from $80 to $600 net monthly cash flow. I am in the north Georgia region and realize there are varying expenses based on region. 

For any experienced rental property owners: Obviously more is better, but do you have a minimum monthly cash flow amount that you require in order to purchase a property?  If so, what is this figure for you? 

Thanks so much for any feedback. 

[Steve Miller]

Jordan - I'd focus less on the "per door" number and more on your return on investment. Think about it - you could deploy the same amount of money for one large unit (say a single family, large condo, etc) or a 4-family property. By nature, the 4-family is going to cash flow less on a "per door" basis, which means that it's nearly impossible to use this metric to compare properties on an apples to apples basis. It's an irrelevant metric. When I first started investing, I used cash-on-cash returns (annual cash returns/cost to acquire) because it seemed to me a logical way to compare the investment to others, like you might look at a stock investment. Over time, it became apparent to me that even that metric is somewhat flawed because it's so easy to jigger the numbers (ie the same property will have a different "cash on cash return" if you put down 10%, 20% or 30%). In my opinion, cap rate (net operating income/price) is the best way to judge because it's a constant. 

The apples to apples comparison thing is particularly important when you then consider that whatever market you choose to pursue is going to have differing definitions of what the market will bear for a "good investment". Denver looks different than Georgia which looks different than Cleveland from a cap rate perspective. It will even vary across asset classes, neighborhoods and quality of tenant (higher end properties in general will yield lower cash flow and lower cap rates, which isn't the end of the world, it's just the trade offs you are making when you choose a subset of the market in which to invest). Here in Colorado, I have properties ranging from 7 caps to my best, which is a 9.2 cap at the time of acquisition. That's my definition of "good" and they are challenging to find in my market and for the class of housing that I seek for my rentals - probably less than 10% of listings I see in my market have a cap rate in excess of 8. But at least now I have defined standards - either something that already is, or I can make into something exceeding a 7.5/8 cap - instead of spending my days ruminating about how the perfect deal is going to come to me. At the same time, there are folks on this site, particularly in different markets, that would not touch my 8 cap with a 10 foot pole.

This book reads more like a text book than some of the other real estate books out there, but is very good for getting a basic grasp on how to look at basic metrics to analyze a deal: What every real estate investor needs to know about cashflow by Frank Gallinelli.