Quote from @Dan H.:
Quote from @Glen Wiley:
I look for minimum of $300/ month cash flow for LTR on a house in the $250-300k range.
I hope you are also expecting appreciation in excess of inflation because at 80% LTV this is 6% return which is crap long term return for an investment as non passive as residential RE. S&P 500 has lifetime return near 10%. Money market options currently approach that return. RE syndications that have exited recently are typically far higher than double the cash flow return (but leery about using past returns as indicator of future return). Each of these are far more passive than residential RE.
6% return from cash flow would be good in many markets, but 6% in many other markets (Detroit, cleveland, etc) would be horrendous.
minimum cash flow expectation is market specific. In my market I currently see nothing on MLS or off market that cash flows as a traditional LTR (not including rent by room or STR/MTR). Result kid I have not purchased a new acquisition in 15 months (it’s Ok because I purchased over $4m that month).
Good luck
You are missing some the vectors that must be included in roi:
1. Cash flow based on rent which increases year over year
2. Appreciation- depending on area is often well over 5% per year
3. Principal pay down, grows every month over life of loan
4. Depreciation over 27 years, even better if bonus appreciation.
Add these together and roi easily exceeds 30% yoy, add in ability to cash out refi every year and roi moves past 3 digits. S&P is for chumps.
