What CoC return should I look for?

Question

I am looking to make more first property purchase.  Looking at several single family and one Tri on Friday.  What should be my target for CoC return for my first investment property?

Henry Lazerow · Answer

This 100% “I'd encourage you to look at buying the property that you want to own the most 10 years from now rather than the one that gives you the best cash on cash return in years 1 and 2.”

Travis Timmons · Answer

It's so hard to say...it depends on your market and the individual property. I'd encourage you to look at buying the property that you want to own the most 10 years from now rather than the one that gives you the best cash on cash return in years 1 and 2. Leverage + rent and price appreciation is what delivers the best long term returns. The places where people with options want to live will likely be tighter on year 1 returns but double in value and rent 10-15 years from now.

Casey Ahlbrandt-Rains · Answer

@Jason Deveau Great question! It depends on what your strategy is prioritizing.

Best CoC we typically see (over 20%) is from renovating bungalows in on a "good-enough" block a placing a Section 8 tenant. This is well suited for strategies emphasizing cashflow, but not necessarily growth.

If your horizon is a little longer, I'd encourage you to do the research to identify properties that have potential to provide growth in rental rates as well as growth in property values.

Let us know if you need any help!

Joey Banasihan · Answer

Hey @Jason Deveau, which ever one gets you to take action and purchase your first property. CoC is fine but its a measurement based on a very specific set of data - and any of those pieces could and will change (cash invested, interest rate, mortgage, maintenance, rents, etc.). My first properties I believe had a negative CoC when I got them, and now they are well above 18% - but the amount I money I made and the things I learned would had been completely lost if I had looked at CoC. Find an area that has had consistence appreciation and rental growth over the last 15 years, work with someone who can help identify value add opportunities, and then jump in. Hopefully you find one that helps you get started!

What CoC return should I look for?

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