Positive cash flow is a great thing, but how much is enough? Obviously the more cash flow the better, but awesome cash flowing properties don’t exactly grow on trees. It really is a personal decision on how high of returns are needed to justify spending a lot of cash on a rental property.
I like to see high returns on my rental properties; over 20% cash on cash. Some people would be happy with 15%, 10% or even 5% returns on their cash.
I also think you need to determine how much cash flow per month is enough. If you only invest a small amount of cash, then you could have skyrocketing cash on cash returns, but only a small amount of cash flow. Much of this determination will depend on your financial stability. Do you have an emergency fund? Do you have cash reserves for each rental property? Is $100 a month enough or do you need $200 or $500 to build up your cash?
The great thing about rental properties is they produce higher returns than the cash on cash returns. Besides cash flow you will have equity pay down, tax benefits and HOPEFULLY appreciation. Plus if you buy rental properties below market value, you will walk into the deal with a lot of equity.