Can your desired Cash on Cash returns vary?

[Trey Sutliff]

Hi all, As I continue to educate myself on investing strategies I had a question on Cash on Cash returns. I'm assuming that your willingness to invest in a place with a lower cash on cash return would be dependent on two key things for the most part:

1. How good of condition is the property in

2. Historically how easy has the property been to rent

My reason for asking is, would I be willing to take a lower return - 6-8% if the multi family is in top condition and renting it is relatively painless (so less overall risk). Vs. taking a 10-15% cash on cash return when the place may need continues improvements and vacancy rates could be higher.

Is my logic accurate here?

Thank you!

Trey

[Simon Cox]

@Trey Sutliff I would say you are on the right track of thinking! In the Detroit area where I work/invest, there are some very high cash-flowing properties in certain parts of Detroit. The trade-off however is having tenants who do not take as good of care of the property along with most of the properties not being in great shape. These can also be more of a hassle to manage, fill, etc.

Some of the surrounding suburbs often times have lower cash-on-cash numbers but provide a significantly easier experience. Not to mention a higher probability of appreciation down the road. Cash-on-cash is an great metric to use but it doesn't always tell the whole story!

Deciding what kind of property you want to own/manage is key!

Hope this helps, good luck!