Minimum ROI Requirement for Rentals

[Chris Sweeney]

Do any of you look for some minimum ROI requirement when shopping for rentals? I know, I know, "IT DEPENDS". But give me an idea of a range that perhaps you look for, and in what scenarios.

I have an off-market batch of 10+ garages that I have the opportunity to buy. The owner currently owns them free-and-clear. If I were to pay cash, my cash-on-cash return would be about 7.6% annually. I say no way to that; I could do that in the stock market with more liquidity, less risk, and no time spent. If, however, I were to finance with 25% down, my cash-on-cash return would be right around 11%, and 15.31% if you factor in the principal payoff. It's not phenomenal, but it's not bad. I figure (perhaps naively!) that garages are probably easier to manage than the residential multifamily houses I have, and I'd perhaps be willing to settle for less of an ROI for that reason.

So is a 15% ROI reasonable for garages? How about for multifamilies? What kind of ROI do *YOU* look for? Any other thoughts on the ROI, and any creative ideas for structuring this garage deal? Ideally I'd get the seller to finance and I'd put down an even smaller down payments and increase my ROI, but the seller doesn't want to do that. They don't want to be involved with the garages in any way after the sale.

Thank you!

[Kenneth Garrett]

@Chris Sweeney

My ROI is 30% or better. Most of my projects are using the BRRRR method. Some are completed with no money stuck in so the ROI is infinite. Other projects are on average 36%-50%. All money returned within 3 years. I have done 20% down projects, I still try to follow the 3 year return of my money.