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?
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.
This is a great way to look at it! This is the issue I think I run into. I'm looking for properties, running the numbers and mostly seeing 8-10% CoC with minimal actual cash flow. It doesn't seem worth it for that amount. Unfortunately, I'm having to look at OOS options, as my market is not investor friendly. This complicates it more.
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”
You're in a great area! We love Washington and will likely retire there. We have a lot of friends in Enumclaw/Black Diamond.
Cash on Cash is a big focus for me because it determines how quickly I can turn around and do another deal...
I hate to tell you this, but you're not really getting all your cash back using the BRRRR method. The refi money isn't your cash, since it was free to you when you started. You have to pay for the money coming out in the refi. It's the Lender's money. Your money is still in the house. If you got that money out for future use, and it was free, then it would be 100% CoCR.
Now if you had to pay for the money that was used in the first property of the BRRRR string, then you really can't measure CoCR since you didn't put any actual cash (your money) in the house to begin with.
I know this is an interpretation of the meaning of CoCR, but I think it's valid because of the goal of the CoCR analysis.
I hate to tell you this, but you're not really getting all your cash back using the BRRRR method. The refi money isn't your cash, since it was free to you when you started. You have to pay for the money coming out in the refi. It's the Lender's money. Your money is still in the house. If you got that money out for future use, and it was free, then it would be 100% CoCR.
Now if you had to pay for the money that was used in the first property of the BRRRR string, then you really can't measure CoCR since you didn't put any actual cash (your money) in the house to begin with.
I know this is an interpretation of the meaning of CoCR, but I think it's valid because of the goal of the CoCR analysis.
Thanks for bursting my bubble!
Technically, the tenants are paying for the money coming out of the refi.
I hate to tell you this, but you're not really getting all your cash back using the BRRRR method. The refi money isn't your cash, since it was free to you when you started. You have to pay for the money coming out in the refi. It's the Lender's money. Your money is still in the house. If you got that money out for future use, and it was free, then it would be 100% CoCR.
Now if you had to pay for the money that was used in the first property of the BRRRR string, then you really can't measure CoCR since you didn't put any actual cash (your money) in the house to begin with.
I know this is an interpretation of the meaning of CoCR, but I think it's valid because of the goal of the CoCR analysis.
Thanks for bursting my bubble!
Technically, the tenants are paying for the money coming out of the refi.
Sorry about the bubble burst. LOL.
Yes, the tenants are paying for the mortgage, but that's still not the same cash coming out...it's a new starting point.
All this being said, it doesn't change the impact of what you're doing.
This is kind of a dozen eggs vs. 12 eggs scenario. If you are buying 12, and all they want to sell is a dozen...don't argue.