Re: The Book on Rental Property Investing (Chapter 3 on Sample plans - Plan 1). Brandon's plan "How to make $1 M", is based on 50% cash on cash return "after all expenses have been paid including" everything. Is it possible?
@Mo Adam Yes, but you'll hate yourself for it. Trash assets produce staggering paper returns. We typically run from anything north of 15% in our market. I'm not saying there isn't a purple unicorn out there somewhere, but not in any established investment market...
I haven't read that piece in a couple years...how'd you get the 50% CoC?
in this book, he is suggesting buying $80K fourplex with $20K down and expecting $200 cash flow per unit after all expenses. So $200x4x12 months = 9600 (he rounded it to 10K). That's 50%. Page 54, The book on Rental Property Investing.
I don't have access to his book but I find it hard to believe he bases his model on a 50% cash-on-cash return. I believe I've heard him say he won't accept anything below 12% which is more realistic.
what @Nathan G. said... Brandon expects atleast 12% (and hes right)
Your ROI increases the less of your own money you use. I have several houses that have infinity cash on cash returns, meaning that on my original cash, I paid cash to buy the house, fixed it up, did a cash-out refinance on the property and got all of my money back, and make cash flow. One of my examples:
$37k purchase + $12k rehab = $49k ARV $80k 75% cash out refi = $60k (56+ after closing costs) = none of my original money in the property ; expense ~$450 rent $800 monthly cash flow 350 = $4200/$0 (my original cash) = infinity.
I'm pretty conservative and own most of my properties outright (no mortgage), so my ROI on most of my properties is 12-18%. I could turn most of those into infinity as well but then I'd have a boatload of cash that would have to go somewhere as well, and I'd be increasing my leverage to a number that doesn't interest me personally.