Cash on cash return calculation

[Krista Manna]

I'm assessing a deal on a 5 unit property in greater Boston area. All the numbers look good except the cash on cash return after year one is 5.3%. At 30 years it's 9.7%. I've read that COC should be between 8-12% minimum. Does this mean that this deal does not meet that because it's not above 8% in the first year?

How reliant is everyone on using that number as a go/no go on a property?

Thanks.

[Anthony Dooley]

@Krista Manna there is no minimum COC accept what you consider acceptable. In Boston, 8% is probably good because property is very expensive there. You determine if the numbers are good or bad. Could you put that money into an index fund and earn more? Maybe, but there are other advantages to real estate ownership than COC return.