Cash on Cash for first rental

[Julia Brantley]

My husband and I are looking to go in on our first buy-and-hold rental. I've been hearing and reading different things about Cash on Cash ROI and what constitutes a "good enough" return. My husband has a co-worker that says he springs for 8-12% (but he is in another state), while I have contacts that invest in my area (metro-Atlanta) saying 5-6% is good. Then, on BP forums, we are reading about people that won't go in on anything below 20%!?

We've identified our potential property (townhome) and are speaking with the owner. Right now, we have our incomes / expenses projected fairly conservative and are getting a 6% CoC ROI. I've attached the BP analysis for reference.

With our confusion around what is "good enough" CoC, we're posting here in hopes that the BP crowd can provide us some clarity. Thanks!

[Roger Pokorny]

When I am analyzing a deal I look at two things. CoC ROI of 12% and a cash flow of $200/month. These hurdles can be difficult to achieve but if you look hard enough they are out there. I would consider a lower return around 9-10% and $150/month, but not any lower.

My thinking is I can get 5% returns in the stock market with much less risk. Although 5% about now in the stock market would be a dream. None the less, historically 5% returns in the stock market over the long run is not difficult to achieve. 

I am not familiar with your market but the taxes and insurance look low to what I generally see. If these are off even a small amount, they can make a big difference on your CoC ROI. I would double check these numbers.