Help with calculating CoCR example

[Chris K.]

Hello,

I have been calculating cash on cash roi for an investment property that I have been looking at but I need some help with double checking I am doing it correctly.

Purchase price: 300,000

Down payment 20% : $60,000

Mortgage amount : $240,000 (30 years 3.4% interest)

Property taxes $190 monthly

Insurance : $50 monthly

Repairs and maintenance: $54 monthly

Capex: $54 monthly

Vacancy : 10% (just to be safe)

HOA: $12 monthly

Expenses total with Mortage should be $1,603

If I can rent this out for $1800 monthly that leaves almost $200 monthly positive cash flow.

But I am getting coc roi of around 3.63%

Does this mean this is not a good investment for me ? Even though I am cash flow positive is it bad roi Bc of the large about (60k) I have had to put down?

Appreciation I have calculated in at 1-2% annually

Thanks for any help from anyone!

[Ned Carey]

@Chris K. I'm not going to convert monthly payments to yearly but assuming your $200 a month is correct, then that is a 4% cash on cash return. i generally would not accept that low of a return, Should you? That depends on your goals and situation.

What if that house you are paying $300k for, is actually truly worth $400k in today's market in as is condition? Then it is a good deal.

What if you are a high income earner and can use the depreciation to save on taxes?  What if the property has excellent prospects for appreciation? What if your goal is to preserve wealth rather than create it?

I would consider 4% cash on cash a terrible return. However cash on cash return is only one way to evaluate a deal.