Analysis and Key Metrics

[Cp Rahaim]

I have several questions as I try to finalize my analysis procedures.

1. When analyzing a deal do you look at cash flow per unit after debt or cash on cash return? I ask because I've seen people saying they like $100-$200 per door but if that equates to 3% COC return that's no good. And if you are making a good COC return but the dollars per door are tiny that's no good. Seems like you need a combination of $X per door AND a COC return of Y%.

2.  Cash on cash returns are typically after debt.  But what if there is no debt?  Do you have a cap rate or a before debt cashflow that you like to see?  Similar to question #1 but looking for metrics to use before debt.

3. How do you account for turnover costs? painting, repairs, commissions, etc. I don't think I've ever seen such costs in an analysis.

Thanks

Cliff

[Steven Singleton]

Hi @Cp

There are lots of tools out there that can help answer these questions in a relatively automatic fashion. My personal favorite is here.

You can make a copy of this sheet and then craft it to your needs.

- Steven

P.S. 3% COC is not inherently "bad" it just depends on the investor's goals. In markets like Indianapolis you'll get great COC but your property will be worth $40,000 forever. That could be fine. In markets where you're going to get 5 or 6% appreciation per year, your COC might be 1% after expenses. That can be fine too.