5% ROI not worth it right?

Question

So my question is after I did the analysis on a property in a good neiborhood and all looks good and my cash flow would be 500 a month if I get it for what I would ask for. But with property management in place I would only be getting a little over 5% cash on cash ROI. I would be managing the property at first and that gave me a 10.65% ROI but I am not going to manage it forever so is it not worth it?

Thanks!

Jay Dewberry · Answer

I have to agree with most here, $500/mo in cashflow is pretty good to me. Plus if your goal is long term buy/hold, then over the years as the loan (if you have one) is paid down, the cashflow will increase. Also, you could perhaps add value to the home as well, which could improve equity and justify higher rents.

Brad Saari · Answer

Well there's Cash on Cash and Total ROI. The latter takes into account cash flow, appreciation and equity from loan paydown. What would you be doing with the money if not investing it in real estate? How well versed are you in other areas of investing, etc? I tend to think 5% cash on cash, and 15-20% toal ROI is better than it sitting in a savings account. That being said, 8% cash on cash is usually my line

Aristotle Kumpis · Answer

You can certainly get $500/month cash flow if the property was pricy and/or you put a lot down. But 5% ROI is really bad. I take it that you are not financing?

George P. · Answer

some areas in the US would kill for that return.