Updated about 5 years ago on . Most recent reply
Back Of Envelope Analysis
Hello there!
When you guys/girls are looking for a new property, what are some quick calculations you do to determine if the property is worth pursuing? I know of the 1% Rule, 50% Rule, Cap Rate, Cash on Cash Return and a few others but i dont know how to take those numbers and use them. How do i take the math i have done and make the decision to analyze deeper into the property i am looking at? Thank you!
Most Popular Reply
@Tristen M Walker I would start by thinking about the types of investments available to you and what returns they might produce. A good index fund historically produces around 8%/yr. You probably want to aim for a higher return than that in RE or it's not worth the considerably greater effort required. Unless you're looking at crazy appreciation, I'd need to have at least 8% cash on cash return and at least $150/door/month, otherwise other assets might give a similar return for much less work, and with less cash flow you're unlikely to get near financial freedom anytime soon. Hope that helps.