Cash on Cash ROI Evaluation for Single Family Buy & Hold

[Matthew McMahon]

For my first real estate investment, I am analyzing many single family residences for a buy and hold in the southwest suburbs of Chicago. I have been doing a lot of research and I keep reading that a smart investment will be over 8% Cash on Cash ROI. The property that I am leaning towards only has a Cash on Cash ROI of 5.15% but the monthly cash flow is $315.00, which to me sounds great.

Cost of project includes 25% of purchase price ($165,000 x .25= $41,250) $24,000 rehab costs and $6,600 in closing cost. ARV is $220,000 to $230,000.

The area I am looking is averaging $2,000.00 in rent for a 3 bed 2 bath, 1200 sq ft home. I have included in my expenses vacancy (5%), CapEx (10%), P&I and taxes, repairs (5%), insurance (5%) TOTAL EXPENSES = $1,687.15.

My question is should I keep hunting for a better deal to achieve an 8% or higher CoCROI or does this investment make sense? Any and all feedback is greatly appreciated.

[Joe Villeneuve]

CoCReturn is a reflection of how fast you will recover the cash out of pocket.  Remember, you can't turn a profit until you recover your cash...all of it.  The lower the CoCR, the longer it will take before you start to turn a profit.