All Forum Posts by: John Martinez

 1k per SF,  ( typically not less the 20% net ) I never finance. Ex. All in PP 75k, rent 1400. All in 85k, rent 1800.  I would never do a deal where I take home $150 

The answer should be, whatever you are comfortable with. I think 5-10% cash on cash return is decent. But if you can cash flow anything in an appreciating market then you are doing it right. Only question is does that $150/month cover all the potential fixes you will have to do? Does it buffer for a month or two of no tenants? If you can appreciate 50k in a few years it's acceptable to break even on the monthly cash flow. Some people would even take a small loss if they knew the appreciation was going to be there.

@John Martinez

I just put in an offer on a SFH In Indianapolis metro area and that will be my likely cash flow, $150 a month. It's in a growing area. I have another SFH rental that was cash flowing over $400 a month but I bought it 10 years ago. It's now cash flowing about $162 a month - my property taxes went way up since I lost the homeowner exemption when the county figured out I was renting the house (I used to live there). I chose not to sell because it's in a Class A suburban neighborhood with a great school district and is appreciating in value. I have a low interest rate 3.875% and the tenants are paying down my mortgage.

I look at the economic growth in the area and appreciation. If I was strictly looking at cash flow, I would have sold that suburban house but then I'm looking more expensive homes with a much higher interest rate. In California it's negative cash flow at these high prices, so I'm buying in the Midwest. I'm not sure where people are finding properties, SFHs specifically, that are cash flowing $300 to $500 a month right now...send me those listings :) 

I agree with @Dan H. about cashflow not being guaranteed. Although rents skyrocketed in vegas during the Great Recession which helped me expand. I could have been wiped out during the pandemic if I had the wrong mix of tenants. The only tenants I lost had been with me for 7 years. But they owned a trucking company serving the casinos. They went from making a couple hundred thousand per year to unemployment with no signs of when their income would return. 

Appreciation of rents will solve cashflow problems but the returns from property appreciation is where all the wealth is made. Especially as a return on cash. If you need the $100/$200/mo cashflow to survive I don’t think real estate is for you. It can go away with one ac unit or new roof. But it is the key building block to getting wealthy. 

I would want atleast $400 for a multinunit. For a condo maybe $200. For a house $300 these are after assuming vacancy etc

@John Martinez

correct, you force equity in the form of renovations. and yes, there is risk involved, as you're taking an educated guess at what it will appraise for. i am working on a BRRRR now that i think is going to work out pretty well.

the point i was making was not that this is better or guaranteed - just that it's an option.

Interesting how responses on here have changed from 3 years ago when real estate was supposed to cashflow. I would never recommend a deal with $150 a month net that can easily be wiped out if taxes go up, bigger repairs, etc. 

For me cash flow is not king.  I am about total return.  If I am not producing $1/month per unit of total return, then I would be disappointed in my RE investment.

Cash flow is taxed in the year earned (at least cash flow beyond depreciation).  Value adds and appreciation are taxed at sale if not 1031 to another investment.  If you die, the RE gets a new baseline and the taxes from appreciation are never paid.  Equity paydown is similarly never taxed.

If you need the cash flow to pay the bills, you have less options to returns other than cash flow.  If you have the assets that cash flow is unnecessary, you can concentrate on total return without needing to focus on the cash flow.

Good luck

@John Martinez

I'll do $0 in cashflow if I can force a big amount of equity.  But I wouldn't recommend this to someone buying their first property.