Duplex cash flows $650 a month. Good?

[Justin Reader]

I have a duplex that cash flows $658 a month after all expenses are paid. Would you consider this good cash flow?

When you buy an investment property what is your target cash flow on a property to make it worth it when looking for cash flow?

Thank you!

-justin

[Nick Schiltz]

@Justin Reader

Hello Justin, there are different factors to take into account and all ultimately depend on what your opinion is. CAP rates, ROI, and the location are often good indicators. (650x12)/ purchase price would give you the CAP. Say you bought it for $200k, 7800/200,000=.039 then it would be 3.9% which is sort of low but that also depends on the are you are in. The riskier the location, usually the higher rate. Plus rates are getting pushed down with all the high demand for multifamily. In big city high demand areas like Boston, 4% is pretty average.

The ROI is pretty much the same but divided by how much cash you put in the deal. If you only put down 10% (or $20k in our example) 7800/20,000=.39 then you would be getting a 39% return on your money which is terrific! Not going to get that with it just sitting in the bank. You would recoup your initial investment in 2.56 yrs (100%/39%).

There are more advantages such as loan pay down, appreciation of the property value, and depreciation for tax purposes help the overall deal as well.

Hey when it comes down to it are you happy with it or is it stressful and not worth your time? Your making money right?

Hope this helps and goodluck on future investments!