Alright so, a buddy of mine texted me and said, “Hey, Brandon! I’ve got this real estate deal I want to buy and it should produce between $100 and $200 per month in cash flow. Is that a good deal? What do you think?”

Basically, $100 to $200 per month is something people oftentimes hear me say.

How Much Cash Flow Is ‘Good’ for a Rental Property?
I host a webinar every week on BiggerPockets (it’s available for free at BiggerPockets.com/webinars), where I talk about this idea. I generally aim for $100 to $200 in cash flow per unit that I buy.

So, for the duplex, I want to $200 minimum; if it’s a fourplex, I want $400 minimum. And that’s cash flow leftover in my pocket after all of the bills have been paid, after everything is said and done. I want at least a minimum of $100 per month per unit on a single-family house, I usually aim for about $200 on a multifamily—again, after all of the bills have been paid.

Now, I say that, but then there’s a caveat there. Because it really depends on how big the deal is, right?

I mean, I think about it this way. If you were to invest a million dollars into any kind of investment and you’re making $100 a month, is that a good deal?

It doesn’t sound like a very good deal. But if you were to invest $500 into an investment and every single month you made $100, that’s the best investment in the world, right?

And so, the idea of cash flow per unit or cash flow per door is a great metric. But it’s only one metric that you can really go by. There’s another metric that we care a lot about, as well: cash-on-cash return.

Cash-on-cash returns is what percentage of my investment that I 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.

So, going back to my buddy who asked me if $100 or $200 may be a good deal for the single-family house he wants to buy. Well, the question I asked him was: “How much money did you put into it?”

His answer was $74,000.

Keep reading the article here:
https://www.biggerpockets.com/blog/how-much-cash-flow-should-rentals-make

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