Ive dabbled with the idea of rental property before, just never followed through as well as not being able to find what I was looking for at the right price.
Regardless, the subject has come up in discussion with someone I know who has sold a successful business and looking for a place to put some money with an eye toward semi-retirement.
One part of the discussion turned to "cash flow" - the amount you get after expenses on the rental property.
Anyone care to share some examples of your best cash flow properties.

I don't view rental properties as "cash flow".  The ROI on a house where I live would be decades.  It's more of a real estate investment that will cashed in for the equity.

Rental properties need to have positive cash flow.  You need to be open to investing in property elsewhere in the country where rents are higher than mortgage payments.  If you're not doing that then you're basically betting on the property appreciating.  Ideally it will do this anyway, but it should be a nice bonus instead of the basis for your investment.

My rental property which is a 4-plex brings in 2.6% a month of the initial purchase price. This means in a perfect world I could pay it off in 39 months but that does not take into account the cost of taxes insurance and upkeep. I will not look at property unless it pulls in at least 2% a month of the original cost. I am lucky that were I live rent is high and house cost is somewhat cheap.

This a good way to look at it.

Im in a good market for rentals but not that good. I do about 1.7 percent on mine.

Typically i figure worst case scenario mortgage and taxes will be 50 percent of rents or less. Maintenance and overhead will be 50 percent. Anytime i can beat it there is cash flow but i save that for major repairs. Typically i can cash flow 20 to 30 percent of the rent because i manage them myself. Most of mine are 2 or 3 plex. I have one 4 plex. The more units the better the numbers get. A lot better.

I figure most of my profit is appreciation (i figure 1 percent bc that is probably worst case scenario) and tax savings.

The profit margins are terrible but the return on investment is very good because i leverage a lot. I buy another property everytime i have enough equity in the properties so im always around 20 to 27 percent equity max.

Am I correct in assuming that your scenario only applies to something like a 4-plex or a triplex as I could not see it working for a single family home.
Example in my area a 3-4 bedroom home might go for $300k. So with your 2.6% per month scenario the rent would need to be $7,800 per month, at 2% the rent would need to be $6,000 per. Both are just silly numbers as a single family home might rent for $2,300-2,500 per month.

Another example my friend just picked up a small two bedroom in an upstate community for $67.5K so under your scenario it would need to rent for $1,350 per month in an area where rents might be $650. My Ins broker has 14 rentals with most being Section 8 and he would never see 2% per month based on the avg cost of properties.  

This is why you become a slum lord. $15k house will still rent for $500/month.  If you're renting upper middle class properties I don't see how you would get ROI anytime in the near future.  

 

Very true. The cap rate, which is what you should be using to measure a properties "worth", is much better on subpar properties.

Typically in the Phoenix area a 9% cap rate would be considered very good for non "slum lord" properties. If your willing to have those types of properties in you portfolio you can get north of a 10% cap rate. Personally I'd rather not deal with those type of properties.

Leverage is your friend in the real estate game.

Right now the gulf coast has the best numbers for rental properties. Good wages, high rental ration, and property appreciation make it ideal right now.

Most of my rentals are just inside the outskirts of college towns. Just too far for college students but close enough for faculty or workers. Upgrade a few faux luxuries like ikea cabinets and you get some good premium rents. In more upscale areas I look for non-foreclosure flips. Too often you can't get a look inside for foreclosres and inspect structural or foundation integrity.

I need to say that I am only the money man in this. My business partner does all the work with property selection and management. We split the cash.

I always told my wife If I can't make $200 a month on a rental, I won't have it.
I have one house that is $115k house, rent is $900, house payment is $550. Insurance and Tax about $1k year.
Set your own boundaries and find houses that meet those results.
Start with one and decide for yourself.

What is your long term maintenance average? Seems like that would be under the $200 a month limit by the time you fix a broken hvac unit or replace a sewer line?

Not sure. I've put a roof on it and just a few odds and ends.
House was paid off this year, 13 years early.
Current renter has been in the house for 5-6 years.