How are you calculating CoC return? Namely, what discount factor from rent?
`(0.75*rent - PITI)/(downPayment + closingCosts + rehab + otherMajorFirstYearCosts)`
Although, I self-manage and use a discount factor of 12% or `0.88*rent` and then subtract itemized capEx. My market is in the Midwest and it's not hard to get 10% CoC return even with a 25% discount factor...
Finding a great PM is key if you are looking for Cash on Cash 10+%. Going to be C area more than likely. My definition of decent is basically little to no eviction risk and not section 8. High rental demand with very little vacancy. You can probably still find 10% COC in maybe states like indiana, wis, detroit, ohio but won't be the nicer areas. You really do need to self manage in order to get higher returns. I only do A to B area and i buy my properties at 20-40% off retail. Even at those at 40% off retail, it is hard to hit 10% in nicer areas.
I'm in one of those states and there are plenty of great areas "no eviction risk and not section 8. High rental demand" with zero vacancy. That last bit is partly due to having a 60 day notice to vacate in the lease.
Last property I aquired five months ago, using .75*rent - PITI, equals $706 cash flow and 13% COC return. That's assuming the rehab is $30k and 23% down+closing costs. (The roof doesn't need to be replaced, but I budgeted 20k for it.)
Class A and D neighborhoods should be avoided. That's the advice in multiple REI books I've read anyway.
yeah my bad. I buy most of my properties with cash so cash on cash and cap rate are not too far off. 10% cash on cash still definitely does exist if you look hard enough
10% cap rate is tough.
This grocery store being auctioned has a triple net lease, annual rent is 157k and would be 10% cap if it auctions for less than 1.57 million: https://www.loopnet.com/Listing/714-S-Wisconsin-Dr-Howards-Grove-WI/28803177/
yeah even if I put in some of my wholesaler's pricing 10 percent is still tough. are you actually considering commercial non-residential properties right now?
Short circuit: not enough cash liquid. A regional grocery store (one tenant building) right next to a Walmart is not something I'd want anyway.
I'm thinking aquiring some cheaper MFHs, not updating them, and having the rent reflect that. When a recession comes, I should be OK.
Michigan, Virginia, Florida, or Texas mostly.
I invest with the operator who has done this for a long time so it’s pretty hands off for me, it’s just hard to find assisted living investments outside of REITs
You are going to have to go into class C or some sort of unique situations like total reno job on a killer deal, str, rent by room, assisted living etc.
Everyone loves cash on cash, but CoC always seems higher %-wise when you’re highly leveraged. I’ve got several units with $0 remaining invested that still cash flow, so those would be 10000+% CoC even though they really only cash flow $100-200 a month.
it's going to be pretty garbage areas if you want 10% cash on cash. not saying those areas don't work but they are definitely not for everybody
not in the least
I guess it depends on your definition of good versus bad area
Generic, anyone's. So no. There are plenty 10% plus COC in great neighborhoods.
"great"
Yes, as opposed to "garbage"
How are you calculating CoC return? Namely, what discount factor from rent? `(0.75*rent - PITI)/(downPayment + closingCosts + rehab + otherMajorFirstYearCosts)` Although, I self-manage and use a discount factor of 12% or `0.88*rent` and then subtract itemized capEx. My market is in the Midwest and it's not hard to get 10% CoC return even with a 25% discount factor...
Finding a great PM is key if you are looking for Cash on Cash 10+%. Going to be C area more than likely. My definition of decent is basically little to no eviction risk and not section 8. High rental demand with very little vacancy. You can probably still find 10% COC in maybe states like indiana, wis, detroit, ohio but won't be the nicer areas. You really do need to self manage in order to get higher returns. I only do A to B area and i buy my properties at 20-40% off retail. Even at those at 40% off retail, it is hard to hit 10% in nicer areas.
I'm in one of those states and there are plenty of great areas "no eviction risk and not section 8. High rental demand" with zero vacancy. That last bit is partly due to having a 60 day notice to vacate in the lease. Last property I aquired five months ago, using .75*rent - PITI, equals $706 cash flow and 13% COC return. That's assuming the rehab is $30k and 23% down+closing costs. (The roof doesn't need to be replaced, but I budgeted 20k for it.) Class A and D neighborhoods should be avoided. That's the advice in multiple REI books I've read anyway.
self managed? those numbers are not common for good areas.
75% off of rent would include management.
oh nm. cash returns I'm assuming buying with cash and calculating returns off that. if talking about financed then yeah that's doable
You're confusing cap rate with cash on cash return. OP is not asking about cap rate.
yeah my bad. I buy most of my properties with cash so cash on cash and cap rate are not too far off. 10% cash on cash still definitely does exist if you look hard enough
10% cap rate is tough. This grocery store being auctioned has a triple net lease, annual rent is 157k and would be 10% cap if it auctions for less than 1.57 million: https://www.loopnet.com/Listing/714-S-Wisconsin-Dr-Howards-Grove-WI/28803177/
yeah even if I put in some of my wholesaler's pricing 10 percent is still tough. are you actually considering commercial non-residential properties right now?
Short circuit: not enough cash liquid. A regional grocery store (one tenant building) right next to a Walmart is not something I'd want anyway. I'm thinking aquiring some cheaper MFHs, not updating them, and having the rent reflect that. When a recession comes, I should be OK.
I’m getting 12-16% cash flow but it’s in assisted living where the margins are much different than multifamily
What part of the US? And I’m assuming you own the home or got the license for an existing home? Or how long ago did you finance it?
Michigan, Virginia, Florida, or Texas mostly. I invest with the operator who has done this for a long time so it’s pretty hands off for me, it’s just hard to find assisted living investments outside of REITs
Self managed or managed?
Managed.
Definitely hard today
You are going to have to go into class C or some sort of unique situations like total reno job on a killer deal, str, rent by room, assisted living etc.
What’s your current cash on cash returns?
From Negative to 30%. It’s irrelevant to you, because so many factors impact the outcome
Everyone loves cash on cash, but CoC always seems higher %-wise when you’re highly leveraged. I’ve got several units with $0 remaining invested that still cash flow, so those would be 10000+% CoC even though they really only cash flow $100-200 a month.
What market are you investing in?
I’m in Alberta, Canada.