Cash-on-Cash Matrix

[Austin Averett]

Hello! I am new to the biggerpockets community but not to real estate. I sold residential real estate for 5 years while I was getting my degree and now work as an analyst for a real estate development firm. I am looking for investment properties (duplex-fourplex) for a couple of clients as well as for myself. However, I am having a very difficult time getting properties this small to pencil. It has seemed that most of the properties listed in my market are offered at less than a 5% cap.

For example: There is a fourplex actively listed at $699k with Gross Potential Rent of $45K (6.4%). If you then apply the 50% Rule, you get to $23K on $699K, or 3.2% Cap on NOI. The issue is then mortgage financing, at 4.5% interest at 70% LTV, you have annual mortgage payments of $27,888; which results in -$4,888 annually.

I then wanted to run a matrix with some LTV and Cash-on-Cash assumptions to basically derive at a cap rate threshold based upon certain input assumptions... See the link below.

https://www.dropbox.com/s/06hcvq9z688ysce/Cashflow...

So my questions is: 

Am I doing something wrong? According to my model, I have to find deals above a 13% gross cap rate to derive at my 8% preferred Cash-on-Cash based upon those financing and OpEx assumptions, which I would say is virtually unheard of in my market unless I want to be an absolute slumlord. 

Do I just live in an expensive market? I understand a good chuck of ROI comes from loan amortization and hopefully a little appreciation but what is a realistic NOI cap rate after debt service?

Thank you! Sorry for the novel length post. 

- Austin