{"id":128525,"date":"2020-08-12T05:00:59","date_gmt":"2020-08-12T11:00:59","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=128525"},"modified":"2021-03-16T17:02:03","modified_gmt":"2021-03-16T23:02:03","slug":"top-2-real-estate-metrics-investors-use","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/top-2-real-estate-metrics-investors-use","title":{"rendered":"The Top 2 Metrics You Need to Know in Any Real Estate Investing Deal"},"content":{"rendered":"<p>When considering real estate deals, I care about two different metrics more than anything:<\/p>\n<ol>\n<li>Cash-on-cash return<\/li>\n<li>Total cash flow<\/li>\n<\/ol>\n<p>So, those two things I care about more than almost anything else, right. Which makes sense. Cash-on-cash return is what percentage of my investment am I making back every single year in profit from the cash flow? And cash flow is like a dollar amount:\u00a0How much per month am I actually making?<\/p>\n<p><strong><em>Related: <\/em><\/strong><em><a href=\"https:\/\/www.biggerpockets.com\/blog\/2010-06-30-introduction-to-real-estate-analysis-investing\" target=\"_blank\" rel=\"noopener noreferrer\">Introduction to Real Estate Investment Deal Analysis<\/a><\/em><\/p>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/jpylUZ_aSMs\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p><strong><em>Related: <\/em><\/strong><em><a href=\"https:\/\/www.biggerpockets.com\/blog\/6-metrics-you-must-know-to-find-great-investments\" target=\"_blank\" rel=\"noopener noreferrer\">6 Metrics You Must Know to Identify Great Investments<\/a><\/em><\/p>\n<h2>What&#8217;s a Good Cash-on-Cash Return? What&#8217;s Good Cash Flow?<\/h2>\n<p>Now, I oftentimes say that for cash-and-cash return, I aim for 10-12%. That&#8217;s what I want for cash-and-cash return. And I aim for between $100-200 a month in cash flow per unit.<\/p>\n<p>A question I got recently on a webinar was:\u00a0What if the actual dollar amount looked pretty good\u2014$200 on a single-family house\u2014but it was only getting a 5% return&#8230; would I do that? Great question.<\/p>\n<p>So, here&#8217;s how I look at that. If I&#8217;m just getting started, trying to buy my very first deal, and only getting a 5% return\u2014if I know that I would have more money where that came from\u2014I would probably do it just to start building momentum. That&#8217;s so long as I was really confident in that 5% number. Because I believe that in the beginning, momentum is more important than your actual return on a single investment\u2014the knowledge and experience you gain are invaluable.<\/p>\n<p>However, that said, I would normally say the cash-and-cash return number\u2014the percentage\u2014is more important than your dollar amount. Why am I even looking at two numbers to being with? That&#8217;s because without using both those metrics, you can manipulate it.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-73457\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2015\/06\/note-investing-question1.jpg\" alt=\"note-investing-question\" width=\"702\" height=\"336\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2015\/06\/note-investing-question1.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2015\/06\/note-investing-question1-300x144.jpg 300w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<p><strong><em>Related: <\/em><\/strong><em><a href=\"https:\/\/www.biggerpockets.com\/blog\/a-guide-to-internal-rate-of-return-and-other-financial-metrics\" target=\"_blank\" rel=\"noopener noreferrer\">A Guide to Internal Rate of Return &amp; Other Must-Know Financial Metrics<\/a><\/em><\/p>\n<h2>Beware of Manipulating Metrics<\/h2>\n<p>For example, what if I had a property that was making me $200 per month? It fits my metric, right? But say it cost me $10 million to buy that property. That would be a horrible deal! It would be a super low\u2014like a 0.0001%\u2014cash-on-cash return.<\/p>\n<p>Now, on the other hand, what if I had a property that was giving me a 50% return on investment? Whoa, that&#8217;s really good! But that just might mean I put $2 into the deal because it was almost a no-money-down deal. And I made back only $1 the entire year. I was making back like $0.08 a month. That&#8217;s a horrible deal, right?<\/p>\n<p>That&#8217;s why I want both these things now. Generally speaking, I care more about my percentage return than I do my cash-flow number; however, I would like to have both those hit my metrics. But again, I would be willing\u2014on an early deal, just to build momentum\u2014to go a little bit lower than that.<\/p>\n<p>I hope that helps!<\/p>\n<p><a href=\"https:\/\/www.biggerpockets.com\/calc\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-117195\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/10\/Signup_3.jpg\" alt=\"\" width=\"728\" height=\"90\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/10\/Signup_3.jpg 728w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/10\/Signup_3-300x37.jpg 300w\" sizes=\"auto, (max-width: 728px) 100vw, 728px\" \/><\/a><\/p>\n<p><em>Questions? Comments?\u00a0<\/em><\/p>\n<p><strong>Join the discussion below!<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>How do you know whether or not you have a good real estate deal on your hands? These are the most important metrics professional investors pay attention to.<\/p>\n","protected":false},"author":710,"featured_media":113510,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4252],"tags":[],"class_list":["post-128525","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-deal-analysis"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/128525","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/710"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=128525"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/128525\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/113510"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=128525"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=128525"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=128525"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}