What is the lowest CoC Return and Cash Flow I should accept
Hi BP,
I am needing some advice on what is the lowest CoC Return & Cash Flow I should take, I am thinking if I invest in a LTR that has a CoC less than 10% and Cash Flow around $50-$100 with the expectation of interest rates going down it will increase both CoC & Cash Flow and I should be in good shape. Is this a good strategy? Should I just keep looking until I find that deal that checks all of the boxes? Its hard to find a good deal what are you guys currently doing?
I wouldn't rely on interest rates going down. Many people relied on them staying low and now are going under so I would hate to see you rely on them dropping and then never doing so.
It also depends on what you are trying to do, LTR? If so then that COC% could be acceptable, but anything shorter/ more active then 10% would be nowhere close to worth it for me.
#4 All Forums Contributor
- Plymouth, MI
Nobody can answer that question for you. There is no universal answer. However, the numbers you mentioned would be terrible. The number one (and only when you are building) purpose for cash flow is to recover your costs. The only cost to a REI is the cash that comes out of their pocket. I require a cost recovery of no more than 5 years, or I don't do the deal.
i only care about $100 cash flow every month, you can wait for a deal that gives you $100 cash flow with 20% down or at this market raise your down payment and buy it. i normally look at the big picture not just the $100. you get appreciation, loan pay down and tax benefit.
You should create a buy box and study your market 60-90 days and determine what the average CoC is, then only buy great deals that are 2-3% above. Each market will be different. Check out Michael Zuber's "buy box deep dive" on Youtube.