Cash on Cash Return Focus - what’s your goal?

Fayetteville, AR · Member since 2018 · 95 posts · 62 votes

Curious how many of you focus on cash on cash so you can repeat quicker investments. And what's your minimum CoC that you'll consider? What market are you in?

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Caleb Heimsoth

Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes

@Kirby Davis for B Class stuff I like 8-10 percent. For C class stuff I like 12-15 percent or higher

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
depends on what segment of real estate your in.
rental houses for SFRs apartments commercial fix and flip or ground up New construction. they all have their parameters and for cash flow investments those usually price for risk and you really never know how good you did until you look at T 5 years
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Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
7y
@Kirby Davis for B Class stuff I like 8-10 percent. For C class stuff I like 12-15 percent or higher
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
7y
Single Family in SE Michigan...100% (minimum 75).
It all depends on the strategy you use. I don't use a strategy, and then try to max out the CoCR.
I pick the Strategy based on my CoCR requirements. If I can't get the property doesn't work with any of my strategies, I don't do it.
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Kirby Davis
OP
Fayetteville, AR · Member since 2018 · 95 posts · 62 votes
7y
@Joe Villeneuve How are you getting 100%? Creative financing? Partnering with equity to put the deal together?
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Kirby Davis
OP
Fayetteville, AR · Member since 2018 · 95 posts · 62 votes
7y
@Caleb Heimsoth Thanks, Caleb.
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Kirby Davis
OP
Fayetteville, AR · Member since 2018 · 95 posts · 62 votes
7y
@Jay Hinrichs Thanks, Jay. Great points. Looking more for SFR, small multi-family (up to 20 units), and mixed use - commercial floor units with residential rentals above.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Kirby Davis:
@Jay Hinrichs Thanks, Jay. Great points. Looking more for SFR, small multi-family (up to 20 units), and mixed use - commercial floor units with residential rentals above.
I think most folks look for 5% to 15% on quality non war zone D class low C class props
Not sure if you can find this.. but one of my more successful cash flow type properties was a storage office combo.. I had 45 storage units with 7k sq ft of commercial above.. small business they had office and storage at one site.. that worked pretty well in a stacked concept.
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
7y
Originally posted by @Kirby Davis:

@Joe Villeneuve How are you getting 100%? Creative financing? Partnering with equity to put the deal together?
Yes, yes, and many more ways to achieve 100%. A big part of it is simply to minimize how much cash you have to recover. If you pay 100% cash for the property, the likelihood of getting it all back within a year is hard...unless you use the BRRRR method. If you buy low and rehab, then refi, you should get 100% easy ...but I don't do that anymore. It's too restrictive, and it takes too long.
The two biggest reasons why I can do this are as follows:
1 - Think of your cash as a "verb" and not a "noun". This means you have to keep it moving, and not stopping at any time...well maybe for a few minutes while it takes a breath.
2 - I use as little as possible.
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Victoria S.
Overland park, KS · Member since 2017 · 113 posts · 44 votes
7y
My minimum is 10% CoC on class B properties. I am in Kansas City. Most of the time it's 12-15% after taking into account all expenses and cap ex, HOA, maintenance and vacancy
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Jason D.
Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
7y
@Kirby Davis my goal is infinite return ($0 invested), but I'm getting about 80%
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Kirby Davis
OP
Fayetteville, AR · Member since 2018 · 95 posts · 62 votes
7y
@Victoria S. I'm looking into KC currently. Are you in SFH or MF?
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Kirby Davis
OP
Fayetteville, AR · Member since 2018 · 95 posts · 62 votes
7y
@Jason D. I’d love infinite!! Ha. Are you partnering or using creative financing to get that 80%?
1 Reply
Jason D.
Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
7y
@Kirby Davis BRRRR method.
Not perfected yet, but I'm getting there
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Victoria S.
Overland park, KS · Member since 2017 · 113 posts · 44 votes
7y
Originally posted by @Kirby Davis:

@Victoria S. I'm looking into KC currently. Are you in SFH or MF?
2-4 multi family but trying to scale up now. It’s harder and harder to find deals that work now.
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Mitch Brunette
Rental Property Investor · Burnsville, MN · Member since 2017 · 48 posts · 25 votes
7y
@Kirby Davis
One suburb Minnesota SFH achieved 11% year one and is on its way to 14% in year two (lower than planned expenses, and rent increase w/great tenants). Another SFH in a remote market in Minnesota but good population of 18k, I'm 2 weeks in and year 1 projection is 20-22%. Time will tell on that. Both are minimal cash in on repairs/maintenance and primary cash in was down payment/closing costs. Both coc above are after accounting for all expenses short and long term, vacancy and property management. My next deal I aim to BRRRR and get at least 60% of my cash out but aiming to achieve 100%.
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Kyle McCorkel
Rental Property Investor · Hummelstown, PA · Member since 2015 · 638 posts · 653 votes
7y
I’m with @Jason D.
My goal is infinite using BRRRR. But if I underestimate some things then I want my minimum to be around 20%.
My best deal was left with $930 in the deal which paid for itself after 2-3 months. That was pretty sweet.
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Jason D.
Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
7y
Originally posted by @Kyle McCorkel:

I’m with @Jason D.
My goal is infinite using BRRRR. But if I underestimate some things then I want my minimum to be around 20%.
My best deal was left with $930 in the deal which paid for itself after 2-3 months. That was pretty sweet.
That's a great BRRRR!
Totally unrelated, my family is from Hummelstown, Pa. My grandfather built a number of houses there.
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Bob Razler
Rental Property Investor · Boca Raton, FL · Member since 2017 · 329 posts · 237 votes
7y
Hello @Kirby Davis :
Keep in mind some ideas when we talk about 100% or infinite COC. It's about the final amount of cash you end up with in the deal.
Take an example - You find a SFH that, if repaired/rehabbed, should appraise at $100k. Let say it would rent for $750/month as well.
If you can get it for $50k and it needs $30k in repairs, yes you may put cash down to acquire it and rehab it. You may do all cash; you may put down 20% and borrow the rest from a private or hard money lender. But once it's repaired and rented, you finance/refi it at the $100k ARV and you pull out $80k (80/20 conventional loan). Let's assume the $80k would pay off your initial $50k + the $30k (and just to make it easy let's assume it covered closing costs, carry interest, etc.) and you end up with $0 cash in the deal. You now have an infinite return on your cash since you denominator is $0.
Now, personally, I have looked for a 12% COC but only have found 1 deal so far at that number.
I would love to see a more holistic discussion of target returns that takes into account other factors like the associated tax benefits (depreciation), growth in equity thru the rent paying your mortgage, etc. The downside is whenever I think that way I feel like I am trying to shoehorn myself into less than good deals just to make a deal.
Bob
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John Woodrich
Flipper/Rehabber · Minneapolis, MN · Member since 2016 · 1k+ posts · 1k+ votes
7y
I focus on cash flow, not rate of return. I look at rate of return but will never buy solely based on it. You can find properties that generate high CoC but they don't have a lot of cash flow. I am not interested in taking on debt, risk, etc to make a 50% COC return that only nets me $2,000 at the end of the year. Not worth my time.
2 Reply
Eric James
Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
7y
When doing BRRR CoC almost isn't relevant, since you more or less aren't leaving any cash on the property.
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Account Closed
Rental Property Investor · Albany, NY · Member since 2015 · 51 posts · 18 votes
7y
@Kirby Davis I'm in Albany,NY and I focus my investment at the moment in college housing (multi family). The cash on cash return I focus on is at a minimum 15%. That's with traditional financing as well, Im just starting out and I leverage my money rather than putting all my eggs in one basket and then cash out refi. I just bought my first 3 unit and it's rented low and not at market rent and once lease ends I plan to increase rent to market rate and it'll provide a 22% CoC.
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Kirby Davis
OP
Fayetteville, AR · Member since 2018 · 95 posts · 62 votes
7y
@Hemang Bhatt those are good numbers! Are you self managing to hit that?
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Josh Collins
Investor · Woodbury, MN · Member since 2016 · 90 posts · 72 votes
7y
@Kirby Davis
Not all Cash on Cash returns are equal. If I could put money into a deal and do very little, I'm looking for 10% CoC. If I'm developing a self storage facility, I want 25% or more for all my effort (maybe more if you're the managing partner rather than the equity partner). Returns should be adjusted for time spent and risk assumed. The rest is up to you on what you're comfortable with. More time spent and more risk should equal higher returns.
Lastly, there are some very stable deals that reputable syndicators are advertising that suggest 8%+ returns are expected with little, to no, work for the investor. I like to use that as a benchmark. Should I put in a ton of sweat equity and time to manage a property that brings home 8%? For me, that's a no. For others, maybe it makes sense. You do learn something by doing rather than signing over funds, so that should factor in as part of the equation if you're just getting started.
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Kai Van Leuven
Investor · USA · Member since 2015 · 325 posts · 447 votes
7y
@Kirby Davis
I have never looked at COC... ever. I personally think it is a worthless statistic that is not applicable to my market. Everything I do is a BRRR (I guess that's what folks call it). I think that most of the analytics that are tossed around on this site are worthless and should be taken behind the barn.
If I see a good deal with a ton of equity, everything else takes care of itself.
I compete against folks paying market prices but are "real estate investors" because they paid 500k for a duplex that they pay PMI on because it's a great COC return, lol.
“See the deal, buy the deal”
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Junior Soares
Contractor · San Jose, CA · Member since 2018 · 262 posts · 407 votes
7y
@Kirby Davis Good evening Kirby, Depends on your goals. In my appreciation markets I'm getting 4-5% COC returns which I'm ok with because they're equity market plays for me. I also have a few properties in the midwest cash flowing 9-12% COC which is great because I know the appreciation will likely not be too crazy. I personally dont do flips but i have a few friends netting 30% COC but it's too much work involved for me personally
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