ROI of 4% too low in Riverside ?

[Peter Bui]

Hey guys! Quick question. I have done the analysis and here’s a quick summary of it. Just wanted to know about the ROI. I noticed houses in riverside are pretty high right now and if I were to 20% down a 400000 property, renting our for 2500 (maybe more, already have renters who need a place for school - 5 bedroom 1550 sf) a month with vacancy, repair, capex, insurance, taxes I am cash flowing approx 270 which i am fine with but ROI is roughly 4%. I know that would be considered really low in some states but considering that it is SoCal do you think 4% is too low of an ROI to invest? Thanks in advanced!

[Ali Boone]

4% is low but in SoCal I would take it because here you're lucky to get a positive cash flow at all.

But...

You sure this property is at 4%? Doesn't look like it would cash flow to me.

Even if it is 4% (which seems unlikely), I assume that is the Cap Rate you are calculating? You want your Cash-on-Cash Return instead of Cap Rate. I'd almost guarantee that's zero or negative, and that's the one that matters.

https://www.biggerpockets.com/renewsblog/2013/01/1...

SoCal is tough.