Cash on Cash ROI Questions

[Mike Lynch]

Hi,

I am trying the 4 square method to analyze a property that I am in the process of renting. We paid $235,000 cash for a 2 unit office building this past summer ( 2017 ) and did a 1031 exchange. Each unit is exactly 1000, sq. ft. each. The rent in my area is around $12.00 per foot or $12,000 per year per unit.

Income --- Rental Income = $2,000.00 ...... ( No laundry, storage, misc, extras )

Total Income = $2,000.00

Expenses

Taxes = $161.00

Insurance = $190.00

Lawn Care $ = 150.00

Vacancy 5% = $100.00

Repairs = $100.00

Capex = $100.00

Total Monthly Expenses = $901.00

Cash Flow = $2,000.00 – Minus Expenses = $1,099.00

Total Monthly Cash Flow = $1099.00

Cash on Cash ROI

Down Payment = $235,000 ( Paid in full all Cash for Property )

Closing Costs = $4,500.00

Rehab = $7,000.00

Misc = $500.00

Total Investment = $247,000

Monthly Cash Flow $1,099.00 x 12 = $13,188

Cash On Cash Return = $13,188 / 247,000 = 5.34%

Hum? ..... Problem is the area here. It is impossible to reach for higher rents. Myrtle Beach, SC and Wilmington, NC can pull twice as much. We are located in the middle in Shallotte, NC.

We Paid $235,000 for the property. According to Keyvon, it is worth $320,000. Tax Value is: $296,000.

What do you think? ( Keep it for a while or sell it after a couple of years? ) The area is growing with lots of homes being built nearby.

Any feedback will be great! ... If I am doing this all wrong, please let me know!

Thanks,

Mike