Good cash flow, cap rate & CoC return - top of market price

[Sarah McCluskey]

There have been many discussions about this being a sellers market, and prices are high.

In my market (between Chicago and Milwaukee), prices are high, but many of the properties still would cash flow well.

When I run the numbers on properties that are in line with the market rates right now (highest it’s been since 08), I get the following.

- $400-$500 total cash flow on a duplex

- 10-12% cash on cash return

- 8% cap rate

I am taking into consideration property management, 10% for capex, 10% for repairs, insurance and property taxes. 25% down on a conventional 30 year.

These numbers look good to me, but I can’t get over the idea of buying “retail” when the market is high. And worrying about prices dropping again and losing the equity. I also hate the idea of paying full price/retail.

Does it make sense to buy these full priced/retail deals that cash flow well? Or should I keep trying to find an off market deal so that I have more equity in case the market drops?

A little background - I’m a bit more cautious than normal about this because we bought our first personal home in 2009 at the peak of the market, and we were stuck there 3 years longer than we wanted to be because we were so upside down. Still paid $20k just to get out of it....