Salt Lake City, UT · Member since 2018 · 2 posts · 0 votes
I am trying to analyze deals for multi-family properties in my area. I have read and heard that cash on cash return on investment is an important number to look at, and that the cash on cash percentage should be close to 12%. What affects cash on cash return on invest percentage when re-evaluating the numbers?
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
7y
Andy:
Cash generated from renting the property (cashflow) divided by your initial cash invested equals your cash on cash return. So, if you put an $8,000 down payment on a property that generates $1,000 annually in cash after all expenses and mortgage payments, you have a 12.5% Cash on Cash return
Of course improving your cashflow involves increasing revenue or decreasing expenses. Or, if you can find a way to minimize your cash invested, then you can also increase your cash on cash return. (Increase numerator or decrease denominator)
I'm not sure where you got the 12% figure. I regularly made 20%+ on my single family and believe you still can. These days its harder to get above 10% on apartments, but the opportunity still exists if you find an apartment where you can drive rents higher over time.