What's better...9%ROI w/ 24%CCR or... 7%ROI w/ 50%CCR

[Kathleen R.]

Hey BP -

If I invest money into the rental units I have my ROI will increase to 9% and my cash on cash return will decrease to 24%. If I leave the rental units "as-is", I will get a 7% ROI with 50% cash on cash return.

What is better? Do I leave it alone or do I put money into the property? 

[Alla Furman]

@Kathleen Rothenberg Unfortunately your statement is too broad to respond to. It would all depend on the location, type of market, type of building and your hold strategy. I can only say if in your market you can attract a better type of tenant with a fixed property then with an "as is" one, it might be worth your sanity to do it. One nasty eviction and your numbers are not going to look as pretty. (Depending on location here in Chicago it's up to 4 months) 

On the other hand, if your tenants are going to destroy anything nice you put into the place, stick to "as is". I have heard horror stories from the South Side where tenants walked out with kitchens and toilets.

If you have multis are they selling fixed? How long does it take for them to sell? What are your market trends? I would check Marcus & Millichap for real estate outlook. I stumbled onto them by accident and thought they were good.

Single families are easier but no one has a crystal ball. I'm fairly new at this by the way, but thought I'd give my 2 cents.