The Threshold of a "Good Deal"?

[John Arnold]

Hi, folks. I'm brand new to the Bigger Pockets community and the real estate investing game. I am unbelievably excited that I stumbled across this educational site, and would appreciate any insight to my question. I live in Northern Michigan and I am analyzing properties using the rental property calculator. For context, I have approximately $18k in cash to put toward my first property purchase and I'm looking at houses that are currently listed between $30k-$80K. I've analyzed 3 similar properties and the respective annual Cash Flow / CoC ROI numbers are as follows:

Property 1 - Cash Flow: $3,808 CoC ROI 20%

Property 2 - Cash Flow: $3,890 CoC ROI 30%

Property 3 - Cash Flow: $3,126 CoC ROI 18%

I guess my question is, what numbers threshold should I be looking at when deciding what to bid on? I know there are numerous factors, but I'm trying to avoid "analysis paralysis" by overwhelming myself with all of the angles. These three properties should have no problem retaining tenants, but I'm wondering what numbers I should be focusing on when deciding to take a closer look at making an offer.

Any examples or insight is greatly appreciated!

[Evan Polaski]

@John Arnold hi John, welcome to what will hopefully be a fun and fruitful venture.

All else being equal, why would you not choose the one with the highest return?  If you are looking for a specific number that would yield a go/no go decision, that is something only you can answer.  For me, I want 8-9% cash on cash passive.  When I first started investing in single families, I was following the 3% rule (I miss the great recession).  But have a bought properties that were less than 3%, yes, however they were in much stronger neighborhoods and still cash flowed really well.

Ultimately you are assessing risk:reward ration.  If property 2 is offering the highest return (reward) and has the lowest risk, it is a clear winner.  But in reality your lowest returns will likely have the lowest risk.  So it all boils down to where you are comfortable.

Cash flow is also typically only half the equation.  While you cannot guarantee any appreciation, it is also where most investors make the most money.  Rehabs are a great way to force appreciation for smaller properties that trade more on comparable sales than financials.  And rehabs that create rent increases can help force appreciation on larger scale multifamilies, where the financials are the driving force of value.