Good Cash on Cash Return for STR If Paying Cash for the Property?

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8-12% is usually good for most investors in your situation. So sounds like you’re looking good.

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@Elizabeth ChanI hate to be the heretic here but 9% cash on cash for a short term rental is not great.STRs are much more management intensive than long term rentals. And more risks too.9% on a LTR, assuming if it was in a good location and not a ton of deferred maintenance would be fantastic.But that being said, if it’s your first deal and you really like it, it will be an invaluable learning experience, even if it doesn’t make the best financial sense.You’re going to make mistakes any way you play it. But no mistakes are going to prove fatal especially if you are taking on no debt with the purchase.Happy to talk more if you like. Take care!

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The reasonable CoC return for a deal like this is whatever you feel is appropriate for YOU. There's no number that a stranger on the internet can throw out that should infulence your decision. Besides, with REI, there are so many benefits that CoC doesn't even begin to take in to account. I don't know if you are getting in to a good deal, but if you can invest elsewhere and get a higher ROI and better property- especially taking equity in to account, then maybe you keep searching, but don't assume this is a bad deal because someone said you should be getting 20%. ROI is VERY market driven, you will get a very different answer from someone investing in Cleveland VS Seattle. Best of luck!

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Sometimes you have to look beyond the COC. People invest for other reasons too. While COC is one of the major metrics used to look at STRS, it’s not the only one

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Awful. I would never do it. 9 percent even on an LTR is low. You could get that doing a mutual fund and never touch it for years. Real estate rarely makes any sense doing full cash investment. Even less when it's an STR because 1. You have to work for that return 2. You're probably not going to get 9 percent because you're new, and you aren't thinking of all the expenses.

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Hi ElizabethThis varies by market but me personally I am looking at 15-25% depending on the asset. For CoC you should just be taking the NOI and dividing by total asset cost. To determine NOI you will take the gross income and subtract ALL expenses to include taxes and insurance, property management, utilities, etc.

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@Elizabeth Chan, First of all 9% c o c compared to any cash investment in the stock market for 100 years is pretty darn good. Especially because it's not a disappearing asset.2nd though - you're not making just 9%. You've also got depreciation and appreciation. So your actual return is much higher.No risk, a cash on cash return that is higher than the historical average for a cash investment, an asset that does not become smaller with valuation, and two other sources of return. I don't know why that's not a winner.

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I may be in the minority here. I mostly read of others discussing he power of leverage and I get it but I've been a firm believer of reducing leverage as much as possible and has worked well for me. Starting from nothing I have ~$5M in real estate (one primary residence, the other 3 a mix of STR and LTR, self managed and property manager) mostly unleveraged. I worked hard to pay off mortgages and sacrificed in other areas. One property (my STR which does well has a small mortgage to help offset taxable income). I retired at 49. I bring this up because I am about to 1031 into a property with only 6% CoC. After reading your post I questioned by decision but it works for me. It's a $2M property that also doesn't achiever the 1% rule. But as someone that is W-2 retired, I look at this as a longer term appreciating asset that will give me monthly fixed income. I expect to cash flow $11K / month on this property. I could purchase more properties and garner higher income but will require more work. I have traditional brokerage account investments also. This is a way for me to diversify and take a longer term real estate play. So think about your overall strategy and not just what other investors say you should try to hit from a CoC return or any of the other investing rules.

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Insightful and rarely mentioned. Diversification and asset appreciation factor into my REI. I'll take 9% as long as the expenses are inclusive of everything - opex and capex. An investor has to find somewhere to put money to work.

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I don't think this is a bad cash-on-cash return in this environment/market. CoC is usually dependent/heavily juiced by leverage so you are going to be really hard pressed to find any returns much higher unlevered