How Much Cash Flow Is Good for a Rental Property

All Investors should establish a target. We modify ours every year.

Our general target cash flow number is $200 per door. (Note: We don’t purchase single families to hold)  Cashflow is what’s leftover after all bills have been paid.  But we don’t use cash flow as our only metric. We also look at cash on cash returns.

Cash-on-cash returns is what percentage of an investment we make back this year in cash flow. To do some basic math, if you invested $1,000 into an investment and you made back $100 in the whole year, that is a 10 percent return. Cash-on-cash return is how much money you made in profit in cash flow during the year divided by how much money you put into the deal.

What Is Considered a ‘Good’ Cash-on-Cash Return?

We use the stock market to guide our Cash-on-Cash Return target. At the time of this blog, our portfolio was up 30% year over year. It’s a great number but we consider that cash locked up & unaccessible but we use it as a guide for what kind of return we want from an asset to throw off cash we can use now.  If we invest in real estate for a short-term flip (one year or less)  our target is 40% return, otherwise, we keep our money in the market.  Right now as we look for long-term buy and hold opportunities that throw off cash monthly we use 15% as our target.  We change these targets every year.