Podcast Summary: BiggerPockets Real Estate Podcast

Episode: How Much Cash Flow Should Your Rentals Make?
Date: January 30, 2026
Host: Dave Meyer, Head of Real Estate at BiggerPockets

Overview

In this episode, Dave Meyer dives deep into one of the most fundamental questions in rental real estate investing: How much cash flow should your rentals make? He addresses common misconceptions, walks through the correct way to measure and target cash flow, explains his personal benchmarks for 2026, and offers practical tips for both new and experienced investors. Meyer emphasizes focusing on cash-on-cash return rather than raw dollar figures and provides nuanced guidance on how to set your own targets based on your individual goals, market realities, and risk tolerance.

Key Discussion Points & Insights

1. Defining Real Cash Flow (00:40)

• Cash Flow Basics: True cash flow is total rental income minus all expenses—including mortgage, taxes, insurance, repairs, maintenance, vacancy, and turnover costs.
• Common Mistake: Some sources define cash flow as just “rent minus mortgage,” but this is incorrect and leads to overestimating returns.
  • "We’re talking about real cash flow here. So keep that in mind… ‘Rent minus mortgage’ is not the cash flow we’re talking about." – Dave Meyer (01:43)

2. Measuring Cash Flow: Absolute Dollar vs. Cash-on-Cash Return (02:45)

• Absolute Dollar Metric: Some investors set per-door/monthly cash flow goals. While simple, this doesn’t account for investment efficiency.
  • "Rather than the total amount of dollars, I want you to measure how efficiently your dollars are earning cash flow." – Dave Meyer (03:19)
• Cash-on-Cash Return: Meyer strongly recommends focusing on this metric to measure profitability relative to the capital invested.
  • Formula:
    Annual Cash Flow / Total Cash Invested
  • Example:
    $6,000/year cash flow on $100,000 invested = 6% cash-on-cash return
  • Explains the efficiency mindset: You must use your capital where it achieves the highest return.

3. Why 7% Cash-on-Cash Return in 2026? (08:00)

• Personal Benchmark: Meyer’s target is a 7% cash-on-cash return by year two (after property stabilization).
  • "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." – Dave Meyer (00:21)
• Day One vs. Stabilized Cash Flow:
  • Most 2026 deals aren’t hitting high cash flow from Day One due to market conditions.
  • Investors should focus on “stabilized cash flow”—returns after executing their business plan (raising rents, renovations, etc.), not initial numbers.
  • "When I think about cash flow, what I am thinking about is what is known as the stabilized cash flow." – Dave Meyer (08:11)

4. How to Pick Your Minimum Cash Flow Target (10:15)

• Benchmark Reasoning:
  • Meyer wants a total annualized return that beats the stock market (typically 8–10%).
  • Adding cash-on-cash (7%), loan paydown (3%), and tax benefits (2%) achieves a 12%+ annualized return.
  • Impact of Compounding: Small percentage differences can double long-term wealth.
    • "If you invested at 8% return… you'll have $466,000 after 20 years. At 12%, you’ll have $964,000." (11:20)
  • Meyer also prefers returns above current mortgage interest rates for a safety buffer.
    • "I basically want my cash on cash return to be higher than the interest rate on my loan." (12:30)

5. The Cash Flow–Appreciation Trade-off (16:20)

• Spectrum, Not Binary:
  • High cash flow properties often have low appreciation prospects, and vice versa.
  • Markets like San Francisco and Austin excel at appreciation but have low immediate cash flow.
  • "You have to think about what is more important to you at this stage in your life: appreciation or cash flow." (17:00)
• Personal Strategy:
  • Meyer does not buy properties that are persistently negative cash flow.
  • He’s willing to accept less cash flow if there is upside potential (great location, zoning, future rent growth, etc.).
    • "If it has a lot of upside, I'll take a lower cash on cash return... If it's a solid asset but not much excitement, then I need a much higher cash on cash return." (18:42)

6. Setting Your Own Number (19:40)

• Guidance for Listeners:
  • Align your target with your stage of investing (early: more appreciation, later: more cash flow).
  • For properties with major upside, a 3% stabilized return may suffice; for stable assets, require at least 8%.
  • Always ensure your plan leads properties to positive cash flow within 12–18 months.

7. Pessimism in Underwriting (22:00)

• Be Conservative:
  • Underwrite using realistic or even pessimistic assumptions—don’t count on best-case rent growth or low expenses.
    • "I would rather take a 5% cash on cash return deal that I underwrite pessimistically than a 12% cash on cash return with very optimistic assumptions." (23:10)
  • Use tools/calculators, but it’s your responsibility to use conservative, honest inputs—optimistic projections can mislead.
    • "If you put in crazy pie in the sky numbers, that's on you to be honest. So be really conservative with your numbers." (24:00)

Notable Quotes & Memorable Moments

• On Misdefining Cash Flow
  "There's a lot of bad information out there about what is cash flow... We're talking about real cash flow here."
  – Dave Meyer (01:43)

• The Efficiency of Capital
  "One of your main jobs is to figure out a way to use your money most efficiently."
  – Dave Meyer (04:00)

• Why Not Day One Cash Flow?
  "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 up."
  – Dave Meyer (08:05)

• Risk Management
  "Cash flow is the way you ensure you hold on to your properties... Negative cash flow can force a sale at a loss if conditions change."
  – Dave Meyer (17:40)

• On Underwriting
  "I underwrite pessimistically. I don't like looking at best-case scenarios... Underwrite in the worst-case scenario."
  – Dave Meyer (22:30)

Timestamps for Key Segments

| Timestamp | Segment | |---------------|------------------------------------------------------------------| | 00:00 | Introduction & Episode Purpose | | 01:43 | Proper Definition of Cash Flow | | 02:45 | How to Measure Cash Flow (Absolute vs. Cash-on-Cash) | | 07:56 | Day One vs. Stabilized Cash Flow Explanation | | 08:00 | Why Dave Meyer Uses 7% Cash-on-Cash (and How to Set Your Number) | | 10:15 | How to Benchmark Against Competing Assets | | 16:17 | Cash Flow–Appreciation Trade-Off | | 19:40 | How to Set Your Number (Spectrum Approach) | | 22:00 | Conservative Underwriting Advice |

Practical Takeaways

• Always include all expenses when calculating cash flow; be wary of oversimplified formulas.
• Focus on cash-on-cash return as your primary metric, not just monthly dollar amounts.
• Set your target return based on your personal goals, current market realities, and risk appetite.
• Accept lower cash flow for properties with strong appreciation potential—but never accept negative cash flow indefinitely.
• Underwrite deals conservatively to avoid unpleasant surprises.
• Use available calculators, but remember that input assumptions must be realistic.

Final Words

Dave Meyer closes with strong encouragement to stay diligent, be honest with your assumptions, and focus on the fundamentals:
"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... Cash flow is alive and well; you just have to think about it in the right way." (25:00)

This summary should provide all listeners—new and experienced alike—a comprehensive guide to calculating and targeting cash flow in the current real estate market.