Buying & Selling Real Estate Discussion

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Antonio Pican
  • Sterling Heights, MI
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Understanding debt financing - multifamily

Antonio Pican
  • Sterling Heights, MI
Posted Jul 18 2019, 13:33
After doing some hefty learning for the past several months I am failing to understand the described below scenario:

If I buy a multifamily property at 600k with 20% down and finance the rest at say 6%..after running numbers my cap rate comes out to about 8% and cash on cash return at about 43% (its 12 units at approx 575 monthly rent income, and the report shows 30k a year in expenses and 80k in gross. My concern though is using my net profit to pay the mortgage obviously and end up with about only 12k hard cash in my hand. But am I missing the point that I am building equity in the property with financing (paying payments) or making improvements to the property to raise rent and to be able to build wealth like that?

Thank you in advance for the clarification.

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