Is anything under 10% ROI worth it?

Question

I have a A few properties that can cash flow up to $1000 a month however the rate of return is only up to 7% I currently am seeing this all over across-the-board did the financing available for me with a 30% down and 6.9% interest-rate makes it really competitive but other deals have been done in the past with higher interest rates so I know that the cash flow is significant but with the ROI be too low? Is photo on cash flow that is not included ￼yet gonna help ?

Russell Brazil · Answer

Cash flow is only 1 aspect of ROI. Sounds like from cash flow alone you already achieve the average stock market return. All the other aspects of the ROI should give you a very comfortable total return.

Corby Goade · Answer

There are so many factors to the types of returns you will get over time that looking at them myopically will blind you to the possibilities. On top of that, everyone calculates their return differently. I have conversations every day with investors that tell me they want a return of X or cash flow of Y, and when I ask them to describe how they calculate that, they are looking at the numbers in a totally different way than I would.

Rents will go up over time. Property will appreciate over time. The goal here is to build equity and have someone else pay the bills along the way. Don't get lost in the weeds and sweat the small stuff. Where do you want to be in 10 years? If whatever property you are considering could help you get there, then don't worry about if you are getting 10% ROI vs 9% ROI because someone on BP said that's not a good enough return.

Kiera Underwood · Answer

Account Closed I agree with others that it sounds like you're in more of an appreciation focused market. If you're achieving cash flow on top of that, you're in a good place!

Mike Dymski · Answer

Active real estate investing is too much work to not achieve outpaced returns. Many investor achieve IRRs in the mid teens investing passively with others; so, active real estate returns should be much higher.

Total REI returns include monthly cash flow, appreciation, principal reduction, and tax benefits.

Brian Ploszay · Answer

Couple of things.  Your cash flow is one aspect of your return.  The property can possible appreciate.  You should know this since you are from California.   Also, part of your mortgage is amortization of the principal.  So you get that as part of your exit strategy (or refinance) return.  Amortization is significant for long terms investments.  You may also shield some of your gains from being taxed immediately using depreciation.

And then there are the dreaded repairs that will eventually blow out your returns for some months.

Blake Edwards · Answer

@Corby Goade - I couldn't have said it any better!  Do what works for you, and the goal here is to build long term generational wealth.

Account Closed - Whether the returns are 9% or 10%, ask yourself will you be building equity, and will someone else be making the payments on your property ;)

Account Closed · Answer

@Corby Goade

Thanks

I appreciate that though of having cash flow from passive income ca earned income, Even if the property is 6.7% ROI to 9%. I can agree to the appreciation aspect and to use equity or to cash out refinance and use that money to acquire another assets as I have studied people do.

This is motivating and clearing up some clouds for me I can’t wait to share my success on the first deal with you all!

Account Closed · Answer

@Michael Chilton

30 years , conventional , I want cash flow and can always use the equity to BRRRR or cash out refi to use it on other properties for a down payment. There’s also a thought of selling them one NOI improves and property value goes up so I can sell it for more and 1031 exchange.

Bjorik Mutize · Answer

Question on whats a good return or not goes from investor to investor. 10% could be good compared to the next guy/gal that wont indulge unless its 15%.

@Russell Brazil brings up a good point on weighing against other opportunity costs.

Russell Brazil · Answer

Returns are measured on an annualized rate. The stock market has averaged an 8% return annually over the Last 120 years or so.

Is anything under 10% ROI worth it?

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