Cash on Cash return?

[Elijah Crew]

Hey,

Big question, I am new to the real estate investing world and I am currently trying to collect as much knowledge as I can so when I start investing within the next couple years I will be more than ready. My question is what is a good percentage to look for in rental properties for cash on cash return?? And how exactly do you measure cash on cash return over a certain amount of years? 

Thank you,

Elijah Crew

[Joe Villeneuve]

Originally posted by @Elijah Crew:

Hey,

Big question, I am new to the real estate investing world and I am currently trying to collect as much knowledge as I can so when I start investing within the next couple years I will be more than ready. My question is what is a good percentage to look for in rental properties for cash on cash return?? And how exactly do you measure cash on cash return over a certain amount of years? 

Thank you,

Elijah Crew

 The desired percent return is based on the individual investor, and how fast you need to get your cash back...in all cases the faster the better.

CoCReturn is ONLY a measure of how much cash you get back within the first year.  Take all the cash (only) you get back in the first year ONLY, and divide by all the cash (only) you put into the deal in year 1.

Example1:  
You buy a property for $100k, put 20% down ($20k), and get a cash flow in the first year of $4000, your CoCR would look like this:
Cash out-->  $4000    = 20%
Cash in-->  $20,000

Example2:
You buy that same property for $100k, all cash ($100k), and get a cash flow in the first year of $8000, your CoCR would look like this:
Cash out-->  $8000    = 8%
Cash in-->  $100,000

Example3:
You buy a property for $100k, put 20% down ($20k), added $10k out of pocket (cash) for rehab, and get a cash flow in the first year of $4000, your CoCR would look like this:
Cash out--> $4000    = 13.3%
Cash in-->  $30,000