Cash on Cash for Single Family Home in Mid West

[Brad Rondeau]

Over the years I have had several rental properties in my state (CA).  After years of low Cap Rates and cash flow in CA, I decided to buy my first single family home in suburb of Cincinnati.   I bought in a nice neighborhood because it was close to my grand-kids and I could spend the first six months doing repairs and improvements and be close to my kids.  This was the only appropriate house in that area for sale so I did probably over pay for it.   Although the area is growing very fast (many new distribution centers, amazon etc.).  I now have a great tenant that is handy and can really help out.  

So here are my numbers -

Paid 160,000

Repairs and improvements 22,000

Down Payment and closing costs 34,686  - Interest Rate 4.25% 

Total all in cost 182,000 with repairs 

Rent 1,500

Net yearly rent 14,533

Cap rate 14,533 / 182,000 = 7.9%

Cash on Cash 14533 / 34686 = 4.1%

This is really the first time I have done the  Cash on Cash calculation - is it correct?  I'm thinking about doing another house in the same area but I'm concerned about my true profit.  Is my investment really only returning 4.1%, with all the work and hassles I have been through?  Or should I also figure in other things like tax write-off, appreciation, etc.  

Over the last 15 years my stock investments have returned and average of 10% per year.  I want to diversify more money out of the stock market in case of future crash, but should  I really sell stock returning 10% (with not tenants to deal with) for another home that returns 4.1%?  Please let me know if I am missing anything.