Is a 15% Cash on Cash Return Realistic Long Term?

[Joseph M.]

I am currently setting up my goals and would like to be realistic in my projected returns, because a couple of percentage points make such a huge difference.

My goal is to use $60K of my own cash from income or to use equity in my properties to buy 1-2 properties per year using leverage. If I use a 15% (in cash flow only) annual return on my new investments, at age 40 (11 years from now), I would have $1.68 Million, and at age 50, over $8 Million. These numbers are not adjusted for inflation and also don't include appreciation and loan pay down.

Has anyone been able to consistently average a 15% return long term on their cash using leverage?

[James Hamling]

The short answer Brian is "yes, but, results may vary", and one BIG variable your not accounting for is that NO real estate has absolute static numbers; there is vacancy to consider, general maintenance but most importantly to never ever forget when doing longer term projections is Deferred Maintenance, those things that DO wear out over time such as roofs, exterior paint/ siding, maybe asphalt, these are some big expenses that if not accounted for can really hit hard. 

I consulted for a private REIT whom had similar goals, so we focused on buys that had newly replaced and upgraded systems like roofs, hvac and so on, so that we had some considerable time of stable numbers without that impact.

Next item is how about rent increases? your COC ROI should improve over time, not remain static and especially not decline, in theory (finger crossed).

Remember the 3 commandments; we make $ when we buy, we retain $ when we renovate, and we reap it when we capitalize it (sell/ rent). It's all about the buy, everything else is adjustments to that.