Starting cap rate/ cash on cash ROI
Hello! Brand new Investor here! Looking to invest in a rental property in either Kenosha Racine or Milwaukee counties of Wisconsin. Just wanted to ask my fellow investors on your first 2 to 4 unit rental starting out what is a pretty decent cap rate / cash on cash roi ?!
thank you for all of your feedback and advance!
Most Popular Reply
Cap rate isn't a measure of return, but rather one of risk. Additionally it isn't used in the residential space, so looking at it is kinda useless.
Furthermore, looking at CoC return is just the beginning, you have to look at how your returns will perform over time. Buying RE isn't like buying a bond and holding it until maturity, where you'll get an effective yield and go on your merry way. Things will change with the investment. Rents will grow at a certain rate as will expenses. You'll pay down the mortgage and the value of home will go up or down. All of these facts are missed by CoC return.