CoC VS Cap Rate

[Michelle Hagewood]

I'm seeking my first SFH investment in the Oakland country area (Michigan ).

I'm wondering if others in this market are content with analyzing 5% CoC or cap rate deals? I've put offers down so far in three properties and they have not been accepted when I have set my budget at where I can have positive cash flow and at least a 5% CoC return.

I am a cash buyer as well and trying to locate the markets where the 1% rule applies…and those markets seem to be the most at risk ones (Detroit, Pontiac, Flint). Not where I want to do my first investment.

Any tips on or explanation on CoC return or should I look more at cap rate since I'm investing cash?

Currently I'm considering a fixer in Lake Orion well below market value that needs work. And even with work and conservative budget projections (including high non homestead taxes) it's reaching the 4%-5% CoC return. But fixing it will bring tons of equity.

appreciate any and all kind :-) feedback. I’m a newbie. Don’t be too hard on me!

[Immanuel Sibero]

Quote from @Michelle Hagewood:

I'm seeking my first SFH investment in the Oakland country area (Michigan ).

I'm wondering if others in this market are content with analyzing 5% CoC or cap rate deals? I've put offers down so far in three properties and they have not been accepted when I have set my budget at where I can have positive cash flow and at least a 5% CoC return.

I am a cash buyer as well and trying to locate the markets where the 1% rule applies…and those markets seem to be the most at risk ones (Detroit, Pontiac, Flint). Not where I want to do my first investment.

Any tips on or explanation on CoC return or should I look more at cap rate since I'm investing cash?

Currently I'm considering a fixer in Lake Orion well below market value that needs work. And even with work and conservative budget projections (including high non homestead taxes) it's reaching the 4%-5% CoC return. But fixing it will bring tons of equity.

appreciate any and all kind :-) feedback. I’m a newbie. Don’t be too hard on me!

Congratulations and welcome to real estate!

Cap rate is not relevant in SFHs. It is a valuation metric generally used in commercial real estate. This doesn't stop many investors in SFHs from using cap rate. I can describe it this way - you can analyze SFHs with COC or you can analyze with Cap Rate. But when you analyze with Cap Rate, you will eventually realize that you need COC. So... why even bother with Cap Rate?

Cheers... Immanuel