Realistic Cash Flow Objectives

I’m planning to invest in rental properties this coming year and wanted to get an idea about realistic cash flow objectives per unit. I read and based on that it seems like $100 to $150 per month positive cash flow per rental unit is a decent place to start. The author’s goal of $300 per unit seemed kinda high to me but maybe that’s just my inexperience. What do you expect to cash flow per rental unit?

It seems like most of the landlords on this site want $100/month/unit profit. That is the number that is used the most often when people decide to buy.

I rent out fully-furnished units, all bills paid, and it is a ton more work. So I am shooting for $300/month per unit profit. But I don’t always get it. Often units go red (negative) or come in at $100/month profit or less. We have very accurate accounting in place so I know what is happening each and every month, on each and every unit.

Looking back on the last 7 years that I’ve been doing this, what really drives profit is…DEMAND. If there is demand for what you are selling, you can sell it. If there is a shortage you can sell it.

There is almost always demand for cheap housing. There is always demand for high-quality housing. But it is impossible to provide cheap, high-quality housing, you will go out of business.

I know landlords who made great profits per month, but they also repaired their own plumbing with electrical tape or whatever they had on hand. Their properties declined month by month. Eventually their tenants and the rents bottomed out. They had milked those properties dry.

A good landlord is always looking to maintain the infrastructure–roof, plumbing, electrical, landscaping, etc. and yet make a profit. You have got to be in it for the long haul.

I know my units will be really profitable when the first loan gets paid off, and then the second loan gets paid off. Until then I am balancing desired profit with necessary maintenance costs each and every month.

Last night I rented out a unit that had peeling ceiling paint and cracks in the wall. It is way past due for repair and paint. But there was DEMAND and I needed to get a nurse out of a hotel. So I apologized for the deferred maintenance and collected the rent.

DEMAND=PROFIT, not some guru’s wished-for number.


It all depends on what your goals are. Do you need that monthly cash flow to live on or do you want to grow your business bigger?
Our business is set up to achieve rents of at least double the amount of the mortgage payments. Mortgages are set up for mostly 10 year amortizations or less so the properties will be paid off fast. My wife and I have good income from our jobs so we don’t pull money out of the business. Our business goal is to grow big enough to be able to live off the cash flow in about 7 years.
So it all really depends on what your business goals are. Do you want lower payments stretched over 20 or 30 years or do you want things free and clear as soon as possible?
As FO said, you can either choose to keep your properties up or squeeze every last dime out of the rent and let it crumble. We’d rather put the necessary money into our properties to make them as decent as possible. I want people to know they’re getting a good quality property and will have good management when they rent from us.
If I calculated our cash flow based off payments for 30 years and applying the 50% rule, most (if not all) of our units would have cash flow in excess of $100/mo. I don’t try to run numbers down to the penny on these house deals. I have enough experience now to know by looking at a house if it will make us money or not.

justin0419, I’m a little lost on your model,if you have rent double the mortgage payments, and you have them set up on a 10 year amortization schedule,it seems like you would have good cash flow now, because you would have an amount equal to the note payment left over for taxes, insurance, repairs etc,

Are you spending a lot to upgrade the properties?

The extra money from the rent has gone into the next property deal. Some houses require more work than others, but all this money is helping us grow the business. We didn’t get any extra money from the bank for rehab on the last 3 houses we bought and one of them needed a good bit of work, so that took most of the money the past few months.