What ROI Do You Settle For?

6 Replies

 I see investors with numbers that seem very low and some with numbers that seem unrealistic.

I tend to see 14-16% ROI on average, but I've seen as low as 10% and as high as 40% for residential rentals.

I'm curious to hear what the BP community is getting in today's market and what your minimum is to satisfy you and for you to consider it a great investment.

Anything less than 25% doesn't seem to satisfy me. I can't bring myself to write a check for $150k between the downpayment and closing costs only to receive 15% ROI, or $22,500 on my money. I can have $150k in the bank or I can make $1,875/month. To me, those numbers don't satisfy me. 25%+ does, however. I spend $150k and make roughly $3,000/month and now things begin to unfold better. I know getting a 25% ROI means either solid MFH investments or getting the property in foreclosure or something and rehabbing. In other words, the BRRRR strategy.

Obviously appreciation plays a part and if you're getting the property at a great price. But appreciation factors aside, what's your minimum ROI you'll settle for and what are you currently getting?

@Timothy Hero

We focus on multifamily and we focus on cash-on-cash returns of 10%+ and a total return of 15%. MF is EXTREMELY competitive these days and these deals are still around but hard to find. I am on many mailing lists for MF syndicators and I have not seen any of them suggesting that they are planning on getting a return of 25%+ (or 20%+ in this market) but I am seeing some estimated returns and rent increases that are very aggressive.

Originally posted by @Charles Carillo :

@Timothy Hero

We focus on multifamily and we focus on cash-on-cash returns of 10%+ and a total return of 15%. MF is EXTREMELY competitive these days and these deals are still around but hard to find. I am on many mailing lists for MF syndicators and I have not seen any of them suggesting that they are planning on getting a return of 25%+ (or 20%+ in this market) but I am seeing some estimated returns and rent increases that are very aggressive.

Even for smaller projects, like duplexes in the $250k range?

I think a $250k duplex renting out for $1,250/month per unit with a decent APR would offer at least 15% ROI.

 

Originally posted by @Joe Villeneuve :

All of the above. The ROI I need is specific to that time period, and is based on the criteria needed from each specific timeline in my Plan.

Would you happen to know your current average?

 

Originally posted by @Timothy Hero :
Originally posted by @Joe Villeneuve:

All of the above. The ROI I need is specific to that time period, and is based on the criteria needed from each specific timeline in my Plan.

Would you happen to know your current average?

 

No.  It's not important to me...the average that is.  I know what it is at any given time, but I don't keep score...and I don't measure my returns based on percentages anyway.  I measure them based on achieving the dollars needed at the time I get them, based on what the plan says I need.

If the plan says I need to add $???/month, I "use" my seed money to get that dollar amount, making sure that in the process I'm also getting my seed money back.

 

@Timothy Hero , if we leave real estate aside for the time being, the return on any investment should be in line with the risks that the investor takes on in order to get those returns. This is the reason that the US 10y Bond currently yields ~1.7%, low risk and low return. Real estate does have opportunities for additional returns 'alpha' because it is an inefficient market. So for example, someone can acquire a property at below market value if they can find a motivated seller.

In general though, when looking at any return, you need to know what risks (leverage etc) you are taking on to get it. Good luck!