High return buy and hold strategy

[Christian Podedworny]

I am in the process of formulating a strategy that can be used to leverage section 8 housing and financing to yield a return over 50% Cash on cash .For the past three years I have been renting my 3 bed 1.5 bath home to a section 8 tenant who is paying $950 per month .The acquistion and renovation costs for the property  totaled $40,000.

Cost Breakdown:

$40,000 property  +cost of  renovation

Expenses:

Taxes $650

Insurance $550

Repairs $500

Vacancy (2.5% of total rent due to low tenant 

Turnover).   $285

Total expenses $1985 / year 

Total rent.  $950/mo

Total rent. $11,400/year - $1,985

 Net $ 9,415

Cash on cash  23.5% 

This scenario does not take into consideration any mortgage but once we factor in refinancing the property and pulling out 70% of value using a 30 year fixed loan at 4.5% we attain a cash on cash return of 39.2%

$40,000 appraised value 

70% cash out 

$28,000 mortgage 

Monthly mortgage payment $142

Yearly mortgage. $1704

Yearly expenses $1985

$1704+ $1985 / $9415(net)

Cash on cash return 39.2 %

  If this scenario is possible through the use of refinancing would someone chime in and give their opinion whether it would be feasible to replicate this using larger funds.

Let's say we are very conservative and pay $50,000 for a renovated 3 bed 1 bath home and rent it through section for $1,000/ mo we can still attain a 18.5% cash on cash return. 

    If we leverage our money putting a healthy 30% down the cash on cash returns becomes 

47.6%

This is my current approach to leveraging the little liquid funds I have to attain the highest return. I would appreciate some advice whether this approach would work and if it would be a solid way to grow wealth in the buy and hold scenario.