Hello Kendra!
Cash on cash return - the annual percentage return you get back on your initial investment.
I think a good use of the years' time you've set before starting your investing is to get really clear on what you want to accomplish here. Understanding the lingo of real estate is very important so when you area speaking with brokers, realtors, property managers, etc, you can express yourself with clarity and assurance and you are taken seriously. Before you begin investing, you absolutely need to know what class of investments you are interested in and what kind of returns you want. The neighborhoods, demographics, economics, are all important and affect your bottom line.
You need to know who the players are on your team, even if you haven't yet built one. You're going to need a realtor, a property manager if you don't plan to manage yourself, a lender, a broker for commercial deals, an attorney, an accountant. Start asking for referrals now so when the time comes you can move quickly.
Start analyzing deals so you get real clear about what your goals are. Do you want a cash on cash return of 10% or is that not good enough for you? Is 100 dollars cash flow per door enough, or do you want 250 per door? No one can answer that for you as we all have different metrics we use to determine a good deal. The more deals you analyze, the more clear you criteria will become.
I'd get real clear on the financing side of things as well, as I think new investors spend a lot of time on analyzing deals but not near enough time understanding the lending side of real estate. I'd recommend sitting down with residential and commercial lenders. Have them walk you through the underwriting process. Ask them what the ideal candidate for a loan looks like. Have them help you calculate your debt to income ratio. Start saving up for cash reserves. Good job on working on the credit by the way!
You're on the right track. I'd suggest using the next year to really get educated about the ins and outs of investing, and getting your team members in place so that when the time comes and you find the perfect investment, you can move on it quickly.
Good luck!
