Can you guys help me...feeling frustrated!

[Shiv Jey]

I can't tell if it's analysis paralysis or if I'm too stringent on my analysis or just not finding good deals.

I'm following the 1% rule. I budget 50% for expenses not including mortgage, but including taxes, insurance, capital expenditures, etc. But for many properties, that's leaving me with a 5-6% cash on cash return, and a 9% total ROI.

For example, 80k house rents for 1k/month. Acquisition costs including minor renovations and 25% Down is 24k. Rental income 1000 minus 50% expenses is 500/month, minus mortgage payment 330 is 270/month. Per year that's barely 1200, which is about 5% COC return!!

I don't need the cash now by any means...my plan is to build a rental portfolio over the next 10-15 years to have a passive stream of 25k/month.  And assuming only a 10% cash on cash return on investments, I'm prepared to put down what I need to.  Problem is, the numbers just don't seem to work out ever on a spreadsheet!  Moreover, with interest rates going up, 5.2-3% is typically what I'm finding, the numbers are even worse!

I'm not looking in Washington AT ALL...it just doesn't make sense.  I am looking at Alabama and Texas mostly.  I dabbled in Milwaukee but again can't find the returns.  Oklahoma, same deal.  Memphis I have no boots on the ground guy and am afraid of ending up in a warzone after hearing numerous horror stories.  Heck, at this rate, I'll take an 8% return because that's what my traditional investments are averaging.  I've also connected with wholesalers but even their deals are just too short to make it work.  

Because it's a long-term strategy for me and I don't need the cash flow immediately secondary to a relatively high paying job, should I be looking at the ROI instead of the COC? Is 50% expenses, even for a relative turnkey, too high? I've talked to a couple lenders and they're all offering between 5-5.5%, am I missing out on better rates? My newest strategy is get conventional lending, fund the rehab myself out of pocket, and STILL The returns are <10%. I can see flipping making more cash but that's just not in my cards right now time-wise.

People have been telling me deals are easier to find and returns are better when the market slows down/crashes.  Well, I'm watching the stock markets fall, interest rates go up, fears of inflation, and crypto crashing (not sure if that's related) and it all points to perhaps a slow down coming which excites me.  But if interest rates keep going up, that only makes the analysis that much harder, unless prices fall significantly and rent rates don't fall as well.  Am I missing something?!  Any help would be appreciated!!

Thoughts!?

[JD Martin]

At a minimum, you should be including principal pay-down in your COC return since that is real money to you; it's just being partially diverted. So if $100 of that mortgage payment is going to principal, your return looks better by $1200 which puts your COC at 10%. Outside of that, you need to look at each deal on an individual basis - no way to know if your expenses are low or high, if there are any tax benefits, if there are more or less rehab costs, etc. Using your round numbers is only useful to determine in 10 seconds if you should bother with any further evaluation.