What is a "good" cash on cash return?
Hi All, I was curious to compare notes with others as to what minimum cash on cash criteria they use to determine if a deal is doable, and what is one they would be really happy with. It seems to be that if your objective is to buy and hold and reinvest your cashflow into new buildings, the biggest determinant of your success is your cash on cash return. If you are making 10% on all your properties, then you will accumulate money and future properties twice as fast as someone making only 5% - so naturally you want that % as high as you can. On the BP podcasts they talk about "$100 per unit cash flow is good" but that's not equally true for a building where you paid $100,000 per unit vs $30,000, for instance. So i was curious to see what criteria some of you use in evaluating whether to do a deal. Right now i am trying for 10% cash on cash, as that seems to me to be a reasonable return, but i don't know if that's too low or if i should be happy making that. Any insights would be appreciated.