Pod Insights BiggerPockets Real Estate Podcast How Much Cash Flow Should Your Rentals Make? About this episode Every new real estate investor asks one question: How much cash flow should my rental property make? For years, you’d hear things like “$200 per month per door” or “it has to hit the 1% rule”. But with so many of these rules outdated, we need a 2026 refresh on real estate cash flow. In today’s housing market, what is good cash flow for a rental property? This is how much your rental properties should cash flow each month to help you reach financial freedom. We’ll show you exactly how to calculate cash flow, the cash flow goal Dave personally sets for his portfolio, and when a property doesn’t need to cash flow based on other crucial factors. Plus, how to create your “worst case scenario” when analyzing a rental property, so even if everything goes wrong all at once, you’ll still be able to pay your mortgage, keep your rental going, and not lose sleep. Is the cash flow you’re making enough, or are you falling behind? We’re sharing it all in this episode. In This Episode We Cover How much cash flow should you be making on a rental property (in 2026)? How to calculate cash flow, cash-on-cash return, and other crucial money metrics Why Dave doesn’t care (too much) about year one (or day one) cash flow Breaking even on your rental? Why this isn’t a bad thing if you’re in a specific situation The cash-on-cash return a rental property has to hit for Dave to move forward on it And So Much More! Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/real-estate-1233 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [email protected] . Learn more about your ad choices. Visit megaphone.fm/adchoices
Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Dave Meyer? How much cash flow should your rental actually make? Because it may sound great if a property will cash flow 200 bucks a month, but if you have to invest 100 grand to buy that deal, that's a bad deal. So today I'll explain how to think about cash flow like an experienced investor, how to calculate the number correctly, how to decide what your minimum cash flow target should be. I'll walk you through a simple deal example and explain why cash on cash return matters much more than the raw dollar amount you're earning. And I'll give you my take on how to adjust your cash flow analysis for the 2026 market. And I'm just going to go ahead right now and spoil this entire episode and say that my answer is 7%.
0:40 Dave Meyer? I want a 7% cash on cash return by year two for any property I buy right now. But that is just my number. Yours is going to be different. And by the end of this episode, you'll know exactly how to calculate your number. So if you want to stop guessing about IRRs and cap rates and start evaluating deals that will build your net worth, you can't miss this episode.
1:08 Dave Meyer? What's up everyone? I'm Dave Meyer, Chief Investment Officer at BiggerPockets and a guy who has literally analyzed thousands, I don't know, maybe tens of thousands of real estate deals. And today I'm sharing how I think about cash flow as I continue to buy residential properties in 2026. We're going to start today by just defining cash flow for anyone who is new around here or for people who are confused on how to calculate it. Because there's a lot of bad information out there about what is cash flow. The proper definition of cash flow is taking your total income, so that's all of your rent for a specific property, and then subtracting all of your expenses. That does include your mortgage. It includes taxes and insurance,
1:53 Dave Meyer? but it also includes some of those variable expenses like repairs, maintenance, vacancy, turnover cost. All of that has to be calculated before you figure out cash flow. There are a lot of videos out there and people out there who say cash flow is just taking your rent. And subtracting your mortgage payment? That is not correct. And that is not the cash flow that we are talking about in this episode. We're talking about real cash flow here. So keep that in mind as we go on, because if you hear people say, I'm getting a 10% or 15% cash on cash return. Honestly, I don't think it's that they're getting good deals. I think that they're actually calculating it wrong. So make sure that you're doing this right and you keep your expectations appropriate to the right number and the right way of calculating it.
2:38 Dave Meyer? So now that we know what cash flow is, how do you go about measuring this? Because you can measure it in two different ways. The first way is the absolute amount. Just how much money are you making each month per unit or per property? You hear a lot of people say, I want to get at least $100 per door in cash flow. Now that is valuable. There is use to that, but that's actually not the way that I recommend you think about cash flow. Instead, I recommend you think about your rate of return. So rather than the total amount of dollars, I want you to measure how efficiently your dollars are earning cash flow. And to do that, you use a metric called cash on cash return. It's really easy to calculate.
3:21 Dave Meyer? All you have to do is take the total amount of cash flow and divide it by the total amount of money that you put into that property. So just as an example, if you're making 500 bucks a month in cash flow, that's $6,000 a year, and you divide that by 100 grand that you invested into this property, that's a 6% cash on cash return. And the reason I like measuring this is because as an investor, one of your main jobs is to figure out a way to use your money most efficiently, because most of us don't have unlimited amounts of capital to just keep going by property and property and property. So you need a measure of efficiency to make sure, hey, if I'm going to go buy a property, this is the best use of my money. And that's why you need to use cash on cash return, your rate of return, rather than
4:05 Dave Meyer? your absolute return. Just as a sort of extreme investment, right? You might say, I'm getting 500 bucks a month. Again, we'll use that as our example. That's $6,000 a year in cash flow. If you invested $100,000, 6% cash on cash return.
4:20 Dave Meyer? That's pretty good. That's a pretty good cash on cash return right now. But if you invested, say, 500 grand to earn that six grand a year in profit, that's just over a 1% cash on cash return, which is not very good. You could do better in a savings account. So it's not really worth your time or money to make that investment. So that's why we use the rate of return. And for those of you out there who may be math averse or don't memorize the formula I just mentioned, I don't blame you, first of all. But that's why at BiggerPockets, we provide tools that will calculate these things for you. You can go to biggerpockets.com/pro and use our calculators, and they can give you all of this information. So during this episode, just concentrate more on the principles of understanding what these numbers mean.
5:05 Dave Meyer? So when you go and use the calculators, you understand how to interpret the numbers that are in front of you. All right, so we got to take a quick break, but we'll be right back talking more about how much cash flow your rentals will make right after this. Summer bookings sound great until someone slips by the pool, gets hurt on your dock, or damages your property during a long holiday weekend. A lot of short-term rental investors don't realize their standard policy may leave gaps when it comes to short-term rental activity. That's why investors use Steadily. They offer landlord insurance built for real estate investors, including short-term rentals. And if you're a BiggerPockets Pro member, you'll also get 5% off your landlord insurance premiums. Visit biggerpockets.com/landlordinsurance to learn more.
5:50 Henry Washington? Here's a strategy that most W2 employees have never heard of. Normally, if you want to write off a rental property against your regular income, you need real estate professional status. That means tracking hundreds of hours a year. Rent to Retirement just launched a program that skips all of that. It's called the STR loophole tenant placement program. Here's how it works. You buy one of Rent to Retirement's Class A new construction investment properties. You set up an Airbnb listing and self-manage it for the remainder of the year. Rent to Retirement then rents the home as a short-term rental to establish it as an STR for the year. No furnishing required, making this the easy button to save $5. Five or six figures in taxes this year.
6:32 Henry Washington? And because you're the sole manager, there's no hourly minimum to meet. That lets you use a cost segregation study to accelerate the depreciation and potentially write off over $100,000 against your income, even on your first rental. Add in cash back up to 13% of the home price, which exceeds $60,000 on some properties. With this massive cash back incentive, investors are seeing total returns up to 126%. New construction, A-class properties, and inventory is limited. Learn more at biggerpockets.com/retirement or text REI to 33777. Again, text REI to 33777.
7:14 Dave Meyer? I just booked a backpacking trip through Olympic National Park. Two nights out on the trail, no cell service, nothing to do but eat trail mix and stare at mountains I'll never get tired of. That's the whole appeal. But while I'm off-grid, my place doesn't need to sit empty. I can list my space on Airbnb and make a little extra income while I'm away. And with Airbnb's co-host network, I could partner with a vetted local co-host to help take care of the details, from guest communications to onsite support, so I can fully unplug and enjoy my time out in the backcountry. If you've got upcoming travel plans, you can find a co-host at Airbnb.com/host.
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8:29 Dave Meyer? Welcome back to the BiggerPockets Podcast. I'm Dave Meyer. Today, we're talking about how much cash flow your rental should make. Let's jump back in. So with that said, that brings us back to our original question. How much cash flow should your rental make? And I want to be clear when I explain my number and what your number should be, that I am not necessarily talking about day one cash flow. You'll probably hear a lot of investors talk about this, day one cash flow, walking cash flow. That's the idea that if you go out and buy a property on the MLS, off-market, whatever, the day that the person hands over the keys to you, you're happily the owner of this new property, that you're going to be earning 3% or 5% or 10%
9:10 Dave Meyer? cash flow. Now, of course, if you can get cash flow on day one, that's awesome. But the realities of the market in 2026 are that it's pretty hard to find great cash flowing deals on the market with day one cash flow. So when I think about cash flow, what I am thinking about is what is known as the stabilized cash flow. This is a term that real estate investors use to describe the period after they've executed their business plan and get the property to the state that it should be in. Because as an investor, what you're likely doing in today's market, the better deals that you can buy are places where, one, you go and buy a duplex, let's say, and it's been owned
9:52 Dave Meyer? by someone who's owned it for 20 years and they haven't really kept up with market rents. And so you buy that property and you bring those rents up to fair market value, that's stabilization, right? That could be part of your business plan. You're getting it to be fair for what the market would bear. The other way that you do this, and is very common, is through value add. So you buy a property that maybe has low rents because it's not a great property. It's not in good condition. It is not meeting the demands of the market right now. So you go out and renovate it. You add a new kitchen. You add a new bathroom. You put in new floors. You throw some paint in there. And then all of a sudden, your rents go from a thousand bucks a month to 1,500 bucks a month. And your cash flow goes from, let's say, 2% cash on cash return, up to 8% cash on cash return.
10:37 Dave Meyer? So when I spoiled my answer before and said that my number right now that I'm looking for is 7% cash on cash return, I'm talking about stabilized. I'm not expecting 7% the day I go out and buy that property. I'm expecting it by the time I have gotten my business plan into place. Usually I try to do that within a year, but it can take 18 months if you're doing a slow burr or something like that. But my metric for cash flow is a 7% cash on cash return by stabilization. Now, if you're wondering why 7%, there's two reasons. First and foremost, you have to think about what else you can be doing with your money right now. I have to get returns that are better than my other options out there. I need to beat the stock market.
11:21 Dave Meyer? I don't know if I'll beat crypto in any given year, but I want to beat the average for any other asset class out there. Historically, the stock market, which I think is the main asset class you should be comparing to, returns 8% to 10%. Depends on who you ask, if you reinvest your dividends, a lot of stuff like that, but 8% to 10% is a pretty good rule of thumb. Now, real estate offers many ways of generating returns that aren't just cash flow. But the way I think about it is if I can get a 7% cash on cash return, my loan paydown, amortization, is usually getting me 3% return just doing that. Then the tax benefits that I get are probably getting me at least 2% return.
12:05 Dave Meyer? So for me, if I get that 7% cash on cash return, I know I am getting at least a 12% annualized return, which is significantly better than the stock market. And if you're thinking, that's not that big of a difference, the difference between 8% and 12%, what does that matter? I should go out and buy the stock market because 8%, I don't have to do anything. And yes, for rental property investing, you're going to have to work to get that 12%. But let me just give you a quick example here. If you invest at 8% return, if you take $100,000, invest in 8% return, over 20 years, compounded, you're going to have $466,000 at the end of those 20 years. That's pretty great. You're making 450% on your money over that time.
12:49 Dave Meyer? But if you invested at 12%, just the difference between 8% and 12%, you will actually have $964,000, nine and a half times your money. That is double what you get at 8%. That is the power of compounding. When you are compounding your investments, small differences in your rate of return make huge differences over the long run. And so for me, that's why my minimum total annualized return is 12%. And if I can get a 7% cash on cash return, I know I can hit that 12%. So that's the primary reason. The second reason, and I won't get into all the details here, but I basically want my cash on cash return to be higher than the interest rate on my loan.
13:33 Dave Meyer? And I can get six and a quarter, six and a half right now on investor loans. And so if I can get 7% cash on cash return, that's better than my interest rate, and I really like that. So 7% is the number I am looking for. But I got to admit, sometimes I buy deals with less cash flow. Sometimes I buy deals with more because it comes down to your personal strategy and where you are in your investing career. And after this break, I'm going to show you how you can calculate your cash flow number. So stick with us. For my wife's birthday, I wanted to make her a new website for her landscape design business. So I researched a lot of different options. I tried out a couple, but honestly, it was really overwhelming. It was pretty time consuming and still the site wasn't coming out the way I wanted it to.
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15:02 Dave Meyer? I just booked a ski trip to Park City and I've already got the whole thing planned out. Five days, first tracks every morning before the crowds show up, my knees reminding me I'm not 25 anymore by the second run, and an embarrassing number of overpriced burritos at the lodge. I don't even care. This is the trip I look forward to all year. But here's the part I actually appreciate. The practical side of my brain kicking in is that my place doesn't have to just sit there empty the whole time I'm away. I can list my space on Airbnb and bring in a little extra income while I'm out getting humbled on a mountain. And with the co-host network, I'm not the one handling all of it.
15:44 Dave Meyer? You can partner with a vetted local co-host who can create your listing, manage reservations, message guests, and even handle the styling. So I get to fully focus on my trip and my place is still working for me the whole time. Find a co-host at Airbnb.com/host. Investing in real estate has always been smart, but it hasn't always been simple. Now it's both, thanks to the Fundrise Flagship Fund. The Fundrise Flagship Fund launched more than five years ago with a mission of delivering low-fee access to blue-chip private market real estate. Today, the Fundrise Flagship Fund has grown to manage more than $1 billion of real estate on behalf of hundreds of thousands of investors, making it one of the largest funds of its kind.
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18:13 Dave Meyer? Welcome back to the BiggerPockets Podcast. I'm Dave Meyer, talking about how much cash flow should your rental make? I shared before the break what cash flow is, how to use cash on cash return rather than the absolute number as your main metric for calculating cash flow, and why, generally speaking, I try to achieve 7% stabilized cash flow for the deals that I buy. But the truth is, I don't get 7% on every single deal. Sometimes it's a little bit less, sometimes it's a little bit more. Because there's this kind of reality that exists in real estate, which is that cash flow and appreciation are a trade-off. In markets or in properties where you're going to get the most possible cash flow,
18:56 Dave Meyer? they're typically in areas or their properties that are not going to appreciate as much. That's not always true, but that is a good thing to keep in mind as you think about these questions. If you want maximum appreciation, then you're probably going to get less cash flow. Just think about markets that have appreciated a lot over the last couple of decades. COVID was different, but if you think about San Francisco, or Austin, Texas, or Denver, or Nashville, those are places where you've seen massive appreciation. Cash flow there, harder to get, but they have great economies. Property values are probably going to keep going up. Maybe not this year, but long-term, those are markets where you're going to see good property appreciation. And so you have to think about what is more important to you at this stage in your
19:41 Dave Meyer? life, appreciation or cash flow. Again, earlier in your career, I would generally say appreciation. Later in your career, cash flow. Now, I have said this a lot when I talk about the great stall and the upside era. I do not buy properties that do not cash flow. So even though I just said all that about appreciation, I do not think in this kind of market that it is prudent to buy anything that is not cash flowing. The primary strategy that works right now in this era is buying and holding on for a long time. And even though cash flow is probably not the best way to build your net worth over the next 20 years, holding on to those properties is. And cash flow is the way you
20:22 Dave Meyer? ensure you hold on to your properties. Because if you buy a property that's negative 200 bucks a month cash flow, and you say, hey, I got a good job, I could foot the bill, I'll pay that out of pocket, sure. But if you lose your job, you might be tempted to sell that property. And with the transaction costs in real estate, you're often selling at a loss, even if your property value stays the same, because you have to pay out your agents and commissions and taxes and all that. And so the key to succeeding in the upside era is holding on to these rental properties for a long period of time. And cash flow allows you to be really defensive. So I buy for stabilized cash flow always. I buy some deals that are negative cash flow the day I buy them.
21:04 Dave Meyer? That's actually quite common. There are a lot of times, day one cash flow is negative. But I have to have a plan in place to stabilize that property 12 to 18 months from now, and I'm going to have positive cash flow. So when you're thinking about these trade offs between cash flow and appreciation, I like to think of it as a spectrum. Whereas if there is a property that is amazing upside, right? We talk about the upsides on the show all the time. Maybe it has great rent growth potential. Maybe it's in the path of progress. There's zoning upside. If it has a lot of upside, I'll take a lower cash on cash return. I would actually take a cash on cash return as low as 3% if I think there's
21:46 Dave Meyer? Really good upside. It's in an amazing neighborhood. There's a ton of investment going on around this property. I've done this several times in my career and they've been some of the best deals I've ever bought. Because I'm not focused on cash flow. I'm thinking this is a great opportunity to build equity, to build my net worth, but I've got this 3% cash on cash return that ensures that even if it takes three or four or five years for those upsides to hit, that I can still hold on to this property and I'm still making a decent return. Now, on the other side of the spectrum, if there's a property with limited upside, maybe it's in a well-established neighborhood that's not really changing that much. Rents are probably not going to grow. It's just kind of a solid asset,
22:29 Dave Meyer? but it's, there's not as much excitement around what the future holds. Then I need a much higher cash on cash return. So I think at least an 8% stabilized cash on cash return there. Maybe ideally even higher cash on cash return for that kind of deal. And I suggest that this is the way that you think about your own numbers. So again, first you're thinking about your own goals and whether you want to favor appreciation or cash flow. And then when you're evaluating any individual deal, you have to think about, why am I doing this? If I'm buying it just for cash flow, that's totally fine. But if you're young in your career and you're saying, I'm just trying to build my net worth now so that I can get cash flow 10, 15 years from now, then you might take that lower cash flow deal if it's in a great neighborhood.
23:11 Dave Meyer? Just make sure that those upsides are actually there, that you're going to be able to do value add, that you're going to be in the path of progress. Maybe there's that zoning upside. Maybe you think rents are going to go up. If all those things are there, you can take a lower cash on cash return today. So that's how you figure out your own number. And before we go, there's just one other thing that I think is really important. I try to mention a lot on this show, but I do think is super important in today's day and age. I always, from the first day that I started as a real estate investor 16 years ago until today, I underwrite pessimistically. I don't like looking at best case scenarios, putting that in the bigger pockets calculator, and then hoping those things turn out. That is not what you should do. I know it's exciting to
23:56 Dave Meyer? Think you're in this great neighborhood and rents are going to go up. But what if they don't? I really recommend to you to underwrite in the worst case scenario. Don't assume rents are going to go to the top of the market. Don't assume amazing appreciation. Make sure to take into account that your taxes and your insurance and your expenses are probably going to go up. Because this is the way to protect yourself in today's day and age. And I know there are people out there saying this property is going to get a 12% cash on cash return. But their assumptions are very optimistic. They are a little bit, I would say speculative. Personally, I know this sounds crazy, but I would rather take a 5% cash on cash return deal
24:38 Dave Meyer? that I underwrite pessimistically than a 12% cash on cash return that an agent or a wholesaler or someone else is saying that I can get. I just think that's the prudent thing to do. So my last two pieces of advice to you. One, calculate your cash flow properly. Do not omit any expenses in there. And number two, be very careful about the assumptions you put into the calculator. Cause the BiggerPockets calculator, it'll do the math right for you. But if you put in crazy pie in the sky numbers, that's on you, to be honest. And so be really conservative with your numbers and calculate this right and use these rules of thumb. If you do that, you will be able to find cash flowing deals even in this market. It may not be day one cash flow. It may not be the 1% rule.
25:23 Dave Meyer? That thing has been dead for a very long time. But if you follow the instructions we've given here, I promise you, you can find these kinds of deals out there in the market today, in almost every market in the United States. So hopefully this has helped you see that cash flow is alive and well. You've just got to think about it in the right way. That's what we got for you today on the BiggerPockets Podcast. I'm Dave Meyer. Thank you all so much for listening to this episode. We'll see you next time.
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26:29 Speaker 04 We can help you sell, market, and hire in one place. We cannot help you be in three places at once. And while we can't help you organize your calendar, LinkedIn can help you land more clients so you have a calendar to organize. Grow your small business on LinkedIn. Learn more at linkedin.com/smallbusiness.
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