What is your target cash on cash and ROI in Central California, trying to evaluate a deal

8 Replies

Hey everyone, we are looking at purchasing a property here in Bakersfield and I wanted to pole our fellow BP members here to see what percentage of cash-on-cash return you're accepting. The potential deal I'm looking at has a COC of 10% assuming I use a private lender I'm in contact with. The price is $222,500, $2,060 in gross rents with long term tenants. 3 houses on 1 lot. I budget conservatively, so I'm estimating roughly $350 in ROI after expenses and savings for future cap-ex. These numbers may be better if I can get the price down and/or negotiate seller financing with a lower percent down. My current assumption is 20% down.

Thoughts on cash-on-cash target percentages, and also thoughts on this deal?  

Where are you coming up with the $350? What's that based on, and is that monthly?

@Russ Beck

Why private money when interest rates are so low with conventional? Also for a multi-family..... 20% down is low. Conventional financing requires 25% down. I would think much of your profit would get eaten up in interest if this is a buy and hold, with private money. What is your interest rate? Have you taken property taxes and insurance and vacancy and repairs into consideration? 

I personally, don't think cash on cash return is even a real number to focus on when buying long term properties to hold.

Just personal opinion


With "traditional," investing like phil pustejovsky mentions returns of 10-20% are excellent however creative or hybrid investing offers much higher returns up to infinite returns or more.

Traditional - requires money such as large down payment, credit, and less specialized knowledge but returns can be 0-20% typically with 20% being very good depending on which metric you're using to gauge like cash on cash, return on equity, etc. If you factor in other returns like amortization, depreciation, etc you can get higher. This may be great for those with out the time to learn, build, and acquire specialized knowledge.

Creative -  Doesnt require much money if any at all, some times none,  but it does require massive amounts of specialized knowledge and hard work. The returns can be exponentially higher than tranditional investing. You can get infinite returns or more.

Updated about 3 years ago

I think the magic is found by using a hybrid of both traditional and creative financing together weaving through to maximize on the pro's of each and to neutralize the con's as well.

Originally posted by @Russ Beck :

Hey everyone, we are looking at purchasing a property here in Bakersfield and I wanted to pole our fellow BP members here to see what percentage of cash-on-cash return you're accepting. The potential deal I'm looking at has a COC of 10% assuming I use a private lender I'm in contact with. The price is $222,500, $2,060 in gross rents with long term tenants. 3 houses on 1 lot. I budget conservatively, so I'm estimating roughly $350 in ROI after expenses and savings for future cap-ex. These numbers may be better if I can get the price down and/or negotiate seller financing with a lower percent down. My current assumption is 20% down.

Thoughts on cash-on-cash target percentages, and also thoughts on this deal?  

HI Russ,

If the min down payment is 20% down then like Jerry mentions you may want to use conventional financing if time for your close of escrow is flexible since private money provides less favorable terms than conventional bank financing.

Private however can be quicker to fund 3-7 days depending on your source which will allow you to be more competitive.

However you did mention "3 houses on 1 lot," if its zoned legally for 1 unit/SFR then you'll probably have to use private financing.

Personally I wouldnt do that deal unless I know I have a conditional use permit for the 3 structures or a reasonable chance at getting it rezoned to 3 units.

Originally posted by @Albert Bui :
Originally posted by @Russ Beck:

Hey everyone, we are looking at purchasing a property here in Bakersfield and I wanted to pole our fellow BP members here to see what percentage of cash-on-cash return you're accepting. The potential deal I'm looking at has a COC of 10% assuming I use a private lender I'm in contact with. The price is $222,500, $2,060 in gross rents with long term tenants. 3 houses on 1 lot. I budget conservatively, so I'm estimating roughly $350 in ROI after expenses and savings for future cap-ex. These numbers may be better if I can get the price down and/or negotiate seller financing with a lower percent down. My current assumption is 20% down.

Thoughts on cash-on-cash target percentages, and also thoughts on this deal?  

HI Russ,

If the min down payment is 20% down then like Jerry mentions you may want to use conventional financing if time for your close of escrow is flexible since private money provides less favorable terms than conventional bank financing.

Private however can be quicker to fund 3-7 days depending on your source which will allow you to be more competitive.

However you did mention "3 houses on 1 lot," if its zoned legally for 1 unit/SFR then you'll probably have to use private financing.

Personally I wouldnt do that deal unless I know I have a conditional use permit for the 3 structures or a reasonable chance at getting it rezoned to 3 units.

Excellent point Albert! That would be the worst, to buy 3 houses on a lot when it's set up for SFH.

Originally posted by @Ali Boone :

Where are you coming up with the $350? What's that based on, and is that monthly?

The 350 equals the gross expected rents less the mortgage, monthly expenses, reserve dollars for future capex and a 10% vacancy factor.  This is $350 divided by 3, so $117 per door.  

Are the expenses you are calculating in--what all are you including, and are you using actual values or estimates?

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