Cash on Cash, IRR and the BP Calculators

[Jordan S.]

Brandon Turner at BP mentions all the time that his metric for analyzing a property is that he wants 12% Cash on Cash and $100/unit cash flow....

In trying the exercise of applying Brandon's requirements using the BP calculators to some potential deals, the Cash on Cash (CoC) return is typically coming in really low and I am assuming the CoC value that is returned in the report is for year 1 only....is that correct?

If that is the case, does anyone know if Brandon looks for a CoC of 12% for year 1 only, or as an average CoC over the period the investment is held? While the CoC may be low in year 1, it does go up quite a bit after year 10. This distinction makes a huge difference in how an investment may be interpreted.

Secondly, why is IRR not included in the BP Calculators or is it and I am somehow missing it?

Thanks,

Jordan

[Ryan Blake]

@Jordan S. The COC is only for one year. How much cash are you putting down on your deals? More than 20% invested? That would cause your cash position to be relatively high and return a lower amount.

I personally don't use IRR in my calculations.

I look for 10% COC and no less than $150/unit when analyzing buy and hold strategies. They aren't abundant in over priced areas but you can still find that in just about every market, they just may not be on the MLS.