Want Real Estate Cash Flow? DON'T Buy Single-Family Rentals

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Cash Flow For Rental Properties: What is Average or Good?

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If you want real estate cash flow, you might be looking for it in the wrong place. Single-family rentals are great, but they aren’t the money-makers most people believe them to be. And EVEN if your rental property has a high cash-on-cash return, you could be leaving TONS of money on the table by not paying attention. Today, Chris Lopez is going to show you how to boost your cash flow WITHOUT buying more single-family rental properties.

Through four different scenarios, we’re running the actual numbers of how your cash flow will rise and fall, whether you pay off your rental, cash-out refinance, sell it and 1031, OR sell and reinvest into something different. You’ll quickly see how your cash-on-cash return number lies to you, making you THINK your properties are doing better than they really are.

00:00 You're Wrong About Cash Flow
01:00 DON'T Trust Cash-on-Cash Return
02:31 Sponsor: Property Llama!
03:22 The True Numbers
05:14 Single-Family vs. Multifamily
07:17 Turn Equity into Cash Flow
08:06 1. Pay Off Your Rental
09:01 2. Cash-Out Refinance
10:00 3. Sell and 1031 Exchange
11:33 4. Sell and Reinvest
15:09 The Point of Real Estate Investing

[JScottInvestor]

It's ridiculous to argue whether COC or ROE is a better metric for determining profitability on an investment. They are measurements of two completely different things.

Cash-on-cash is a measurement of how well every dollar you've invested is working for you. Return-on-equity is a measurement of how well every dollar of equity is working for you.

COC is important when buying a property, as it indicates your opportunity cost for cash flow generation versus the yield on another cash-flowing investment. ROE is important down the road, as it indicates whether there are better opportunities that should lead you towards sale or refinance. In other words, COC is an indicator of whether you should buy a property; ROE is an indicator of whether you should keep a property.

Btw, at the beginning of the video, you say that "percentages don't pay the bills" -- then you espouse another ratio metric (ROE) that is just a percentage. You also talk about time value of money, but fail to mention that ROE has the same issue as COC -- equity is not discounted in an ROE equation either.

[mike]

All these ratios and formulas have their purpose. COC main use is to determine year 1 ROI or to filter out a potential purchase. ROE helps determine the performance of equity it’s very clear that any large amount of money or equity leveraged into another investment will always provide a higher ROI than the initial investment. I personally calculate the IRR for each property yearly and not worry about other formulas. There’s many ways to make money with real estate and cashflow is only 1 of them why ignore the others?

[Emmanuel-lhtf]

Just to be specific, depreciation is not based on purchase price, its based on purchase price -(minus) value of the land. You cannot depreciate the land…

[Teolulz]

the quality of this channel has gone down dramatically.

[ozzyngcsu]

If you factor in the 6-10% cost of selling the property and any taxes or depreciation recapture, it changes things greatly.

[kerrybaird]

Unlike most of the comments here, I think this is a valuable topic, particularly for those of us in the decision-matrix of buying another SFR when compared with small or large multifamily. It can be difficult to choose the tax implications, either pay or 1031, and you ticked that box in this video. You also ticked the cash flow box (almost a myth, as cash flow enables me to hold, but the real money is made in the debt payoff). As an aside, I used to like CoC and now look at RoE before refinancing or selling. SFRs are relatively simple to buy, fix, sell, and they sell quickly, when compared to my luxury STRs or a potential MFR.

[REIwAlexY]

cashflow on equity seems like a strange metric as it completely devalues cash flow centric cheap markets, such as in the midwest like ohio.

[shirleysanchez]

Wow! You were heaven sent. I was not expecting the 4th scenario. I was bummed since I sold a rental property and thinking about the Capital gains, so I was kicking myself for not doing a 1031 exchange. I knew it was a bad investment decision but I do need the cash to buy a house to be close to my daughter in a different state.

So what you said at the end made at lot of sense to me since I am 67 and I really don't want to deal with rentals. I will be happier being with my grandkids and leaving California. Thanks again!👍🥰

[tonyasbille]

We have 229 units and Property Lama won’t let you enter that many units. That sucks

[moviehipster]

Bigger pockets sold themselves out. Paid commercials, really.

[celina]

It make sense Multi family rental is better than single family house for Cash flow

[AberrantArt]

For 1031, can it go from SFR Residential to MFR Commercial? I thought they have to be LIKE properties. Can we go residential to commercial using 1031 exchange??? 🤔

[mr_smilegaming]

All of these metrics related to cashflow will be NEGATIVE in California.

In california, people go for big capital gain and not cash flow.

[katieheinsohn]

Good food for thought and love how you show several scenarios, thank you!

[jonathangamble]

I think you should come up with a variable for risk like Ramsey says to get a full grasp of being that leveraged. Not that I agree with no leverage.

[films.byjules]

Interesting.. Looks like i'm going to be moving into multifamily!

[ChuckNorris-Investor]

Great Content 👌
More Content on Just selling rentals and using That equity. Most Content creators are Always talking 1031, Helocs & Cashouts. But Nobody is emphasizing on Paying the Taxes.

[Red_Dead_Entertainment]

Cant take you serious with that side camera angle like you are in some rnb music video… what is wrong with these people. You are in your 50s just use that one camera and speak …

[bigscinto]

Is this just some dude who bought his first property? He's absolutely clueless. Yall are going downhill fast af and it's embarrasing. I'm looking for new communities now