Properties with min: 12% cash-on-cash return (at 80/20 leverage)

[Jacob Ashley]

Searching for markets with properties that meet or exceed the following criteria:

- cash-on-cash return of at least 12%

- annual appreciation of at least inflation plus 2%-3%

- low crime area

- strong school system area

Above targets to be reached after provision for the budget assumptions below:

- 10% vacancy

- 10% of rent for property management fee

- 10% of rent for CAPEX

- 5%-10% of rent for general Operating Expenses

- 1%-3% of property value for insurance

- 1%-3% of property value for taxes

- 10% of rent for misc. expense retainer

- debt service on 80% leverage

Are my expectations unreasonable, or have you experienced/come across properties in locations where I could achieve these targets?

Look forward to the feedback! Please feel free to share agents/property managers/other “Core Four”-like team member’s info as you deem helpful.

Thank you!

[Jay Hinrichs]

You already posted this scenario.. while it can happen you will have to hunt for it.

like all things real estate returns price for risk.. rare is there high cash flow AND appreciation.. and tiny appreciation like 

3% a year might look good but its not real.. you buy a rental that will make 12% under your scenario you need to find a 50k house that rents for 900 type thing .. which you can find.. so 3% appreciation it goes up a whopping 1,500 a year.. but in reality it stays at the same value.. since the next investor wants to make the same money you are.. only way values increase substantially is rents go way up.. and in cash flow markets rents ( which is a good thing) are generally very stable with not a lot of movement up or DOWN.

But for your exercise check out small little towns in PA  and outside of Pittsburg and up towards Erie.. you will get the cash flow i bet.. appreciation only on paper not in reality.