Small Multifamily in a hot market

[Dustin Turner]

I'm looking to buy small multi-family in downtown Frederick, MD. It's a growing city about an hour north of D.C. Prices here increased significantly over the year and there is limited inventory. As I'm analyzing deals I'm finding some properties that will cash flow. Unfortunately the cash on cash returns hover around 5%. In properties where repairs/updates are needed the ARV's are not high enough to recoup all of the cash put into the property when refinanced. I'm curious to know what others are using as target metrics in hot markets? I've heard on the BP podcasts recently that I shouldn't look at just the first year cash flow and/or returns but consider a few years out.