Can someone help me out with this question. As a wholesaler, I know that a majority of my buyers are going to be landlords. With that said, how do I determine how much a property would cash flow for an investor? Also, what is a good amount per month that a landlord would want to have per month after piti?
Landlords are going to be interested in their return AFTER expenses. Take the gross rent and then subtract all of the expenses (taxes,insurance, maintenance , etc) Each property will have different expenses , for example some buildings the utilities are not separate and the owner pays all the utilities in others the tenant pays all utilities. To figure out the “cap rate” take the net income(gross minus all expenses) and divide it by the asking price . For example a property that NETS $5,000 per year and has an asking price of $50,000 is a 10% cap rate. A “good amount” is going to depend on the price of the property.
These days I think many investors are looking for something with a 10% Cap or more since they won’t see appreciation for who knows when. When property is appreciating people are more willing to buy a property with a lower cap because they figure they will make money on the appreciation. Also each market is different…some areas won’t cash flow at all.
What does your deal look like? Or what type of deals are you looking at? What is the sales/asking price and what are the rents?
Start by getting to know the buyers and what they expect, then work your way backwards. They all have different goals and needs so you can’t generalize. I always ask what it is that they are trying to accomplish and by when. Some will want enough cash flow to accomplish a reoccuring task, like say a car payment ($500 per month), others will want to cover the costs of tackling an upcoming project that requires a large sum of cash, like buying that same car for all cash ($40,000).
Based on that you simply focus on properties that can fit the job.