20% Cash on Cash Multi?

Question

I have the opportunity to buy 3 properties from a owner retiring and selling off his properties.

7 total units

$70k a unit

$490k total

$65k total down

$20k total closing for all

Currently renting @ $800 unit

Need $40k in updating

Market rents $900-$1000

@ $900 that’s a 20% Cash on Cash return.

What are you looking for as return in your deals?

I know everyone’s strategies and goals are different, just looking to discuss.

Thank you

Danny Randazzo · Answer

@Patrick McGrath we look for 150 unit+ apartment communities that have value add potential to increase rents so we can achieve a minimum 8% cash on cash return in the first year and 13-20% IRR over the five year hold period

Russell Brazil · Answer

No such thing as a good or bad return....the return merely needs to be appropriate to the amount of risk you are taking on, and you have to be comfortable with that risk premium.

Lien Vuong · Answer

Given the C/C return and rent roll this appears to be a C class property? This would align with what Boston market C Class properties are yielding for returns, for a more primary market with higher appreciation and lower cash flow, investors are looking at deals in the 6-8% C/C and 4-5% cap but 6-7% appreciation.

Danny Randazzo · Answer

@Hadar Orkibi the b class asset deals are out there. That’s one of our largest targeted property types we buy.

Patrick McGrath · Answer

Property #1 Is 3 units 2br/1b $210k

AVR is $250-$260k

Property #2-3 are 2br/1b duplexs $140each

AVR is $160k each

All units are currently leased, the plan would be to rehab the units as they turnover and use the cash flow for the rehabs. This will provide less out of pocket cash with a goal of refi  in 2 years to pull out some of the capital tied up.

This will get me to the roughly 20% COC. At purchase it will be around 13-14%.

These are C class properties but located in one of the best school districts in Maryland.

Hadar Orkibi · Answer

@Danny Randazzo 8% year one is good results! would you say its far and few between with B Class?

Hadar Orkibi · Answer

@Patrick McGrath  how do you get 20% COC if you are in say 80k a unit and rent it out for $1000pm month?

Are you using any debt?

Patrick McGrath · Answer

@Russell Brazil

Appreciate the response and insight you have provided.

Thank you

20% Cash on Cash Multi?

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