Cashflow or COC ROi?

3 Replies

So i can get alot of properties where i have a INF or really high COC roi but low cashflow say $100 bucks a month. But really its higher because we do are own management but we put all the numbers in like we dont. Being there is no good property management company around here. So What is better cashflow or COC ROI? I have lines of credit and use those so my COC Roi is really high but lower cashflow

Neither is better than the other.  Cashflow is super important but so is cash on cash return.  If your actual cash flow is positive and there are unlimited oppertunities then it could be argued that cash on cash is the more important meaure but since knowing actual cashflow is only possible in retrospect it is important to have healthy cashflow projections.

I consider cashflow a safety net.  The more cashflow the safer the investment.  Higher cashflows through higher down payments are generally safer but have lower overal all cash on cash returns,  lower down payments can produce higher cash on cash returns but are typically somewhat less safe.  With low cashflow you have lower margins for error, ie if a major repair comes along that you were expecting it can destroy many years of cashflow.

All of that is to say you should balance the two, I look for a couple hundred dollars cashflow per door in single families and small multis but in larger deals I will accept less if the numbers look otherwise good.

@Jeffrey Holst Thank you so much for the Response. So what i got out of that is Cashflow is more a safety net? With possible big repairs and such. But I also have alot of lines of credit open and my retirement plan if i ever needed to get into it.  That was a great response and really appreciate it and any others that come back. Thank you

@Joshua D.   That was my basic point.  I realize now I rambled a bit in the response but yes cashflow to me is a safety net and cash on cash return is a driver of wealth.  Obviously the higher you can make both the better the deal.  If you can cashflow $1000 and have a 500% cash on cash return thats way better than cashflow $100 and a 5% cash on cash return and so on.