All Forum Posts by: Jared Murphy

Cory, when I change to an LTV of 70% my CoC goes down. Going from a 1 million down payment to 1.2 million down payment would add $200,000 more initial money invested but only decrease the yearly mortgage payment by $11,237. To calculate CoC you take the annual cash flow divided by the initial amount of money invested, right or am I missing something?

I used the expense numbers from the 7-year hold projection as they were closer to the previous year's actual.  I also used a higher vacancy rate than shown in the Pro Forma and added additional expenses for CapX and Administrative fees making total expenses 40% of the EGI. Yes using a 30-year loan

Taylor, thanks that's a very good reminder. The reason I'm asking is not specifically this one deal. I have run preliminary analysis on several properties from small (duplex/fourplex) to large (38 unit apartment) and I keep running into low cap rate, large down payments and low CoC. This made me wonder why and if that is just a function of low cap rate markets/areas or if I was missing something.

My strategy would be to hold the property, increase the NOI as soon as possible thus increasing the value capable of a refinance to pull the investor's initial money back out of the deal leaving them with equity shares of the properties cash flow. The only hiccup I see is a low CoC on the investor's initial cash investment until the property is able to be refinanced.

Thank you so much @Immanuel Sibero and @Taylor L. the insight from both of you is very helpful!  

Taylor, yes, of course, increasing the NOI is a part of the strategy. I was running numbers on a larger apartment complex and with the higher prices/low cap in my area, I was struggling to get good cash on cash return for the investors (5.5-6.5%). Do you have any suggestions on other factors I should be considering when evaluating the return on investor's money in a low cap rate area?

Thanks, @Jaysen Medhurst  So would it be safe to assume that investors in the area would be accustom to lower cash on cash return on their investment because of the lower cap rate?  

Hello,

I'm new to real estate investing and have been analysis a hand full of deals.  From what I've learned so far the cap rate in my area is between 5.5-6%  As I run the numbers on a 38 unit apartment complex with a cap rate of 5.96 and 25% down I am only showing a 6.71% cash on cash return.  This seems like a low return on money into the deal and my question is it typical to see lower cash on cash return with lower cap rates?  

Thanks

Jared