Cash on Cash return for STR

[Mateo Arteaga]

Hello BP members!

I am in the process of currently looking to buy a STR in Garden City, UT! It would be my first STR, but I have ran most of the numbers on AIRDNA. The only problem I am having is trying to calculate the COCR? Can anyone help me out? Also, what % do you guys shoot for on STR's and is there any other variables I should be eyeing on the analysis side of things?

Any feedback is appreciated! TIA! 

[Kevin Pillow]

This biggest variable you will need to watch is your acquisition cost. The down payment and closing costs are the main components of the deal acquisition, so if you put 10% your CoC numbers are going to look better than if you put 20% down. That comes at a trade off for that higher CoC return and it is the cashflow amount. If you put less money down and are financing more, your monthly principal & interest payments will be higher and that reduces your cashflow.

The equation for CoC = Cash Flow÷Total Acquisition cost

Total Acquisition costs are made up of:
1. Down Payment
2. Closing Cost