All Forum Posts by: Ryan Fortier

The books I've read refer to the Cash on Cash return as a snapshot in time.  It is the return on your cash invested in year 1 of owning the property. It has nothing to do with the possible appreciation of the property, the mortgage reduction or the tax savings. How do you calculate your Cash on Cash return after year 1? Well, that seems a little tricky, as in year 2 your property appreciated and your mortgage balance was reduced. That is real money that you just made in addition to the cash received. How would you account for that money mathematically? Which formula do you use? The Cash on Cash return formula is no longer appropriate, as that only accounts for your initial down payment and the cash flow received.  I believe what @Llewelyn A. is explaining is this very concept and one I don't hear a lot of talk about, which is your total Rate of Return. As I have come to understand it(correct me if I'm wrong), I refer to it as the Internal Rate of Return(IRR). The IRR will take into account the cashflow, appreciation and mortgage reduction for a property. However, the timing of these cash amounts are important as well, which the IRR takes into account.

My Uncle has been an agent and investor for 20+ years in Portland. I can send you his contact information if you'd like.

@Todd Fox I just raised the rent by $100 this renewal, but I think I'm pretty much at market value for now. I'm currently at 50% LTV and am actively talking to banks to see if I can tap some money through a cash out refinance. It's still a bit confusing trying to figure out the difference between banks, brokers, portfolio lenders, credit unions, who lends to what guidelines, etc. If I could get a couple hundred grand out to reinvest it would be a no-brainer to hold onto the property.

 Regarding the investors out there who focus on cash flow in areas outside of major cities in demand like NYC, Boston LA, etc, when markets crash how much have you seen rents drop? I haven't been around enough to see or experience the up's and down's of rental markets. Somehow in my mind I think even if rents drop, if wouldn't be a significant amount? 10% maybe? As long as your bought at a good to great deal(8-10 cap rate), even with a drop you should still at least have a positive cash flow. In my 15 years of living in NYC, what @Llewelyn A. says about rents in areas in demand is correct.  Rent's really don't drop in prime areas of NYC. The worst I've seen is that they just level out. For example, my apartment in 2008 would have rented for around 3k-$3,500 a month. Today I rent it for $5,500 a month.

@Todd Fox  Carroll Gardens

@Llewelyn A. Llewelyn financial analysis is correct. My IRR over the years has been 20%-30%. Most of that return has been due to the appreciation. The beauty of the IRR metric is that it takes the time value of money into account. We've all heard the saying "A dollar in your hand today is more valuable than a dollar tomorrow". The IRR is taking into account my monthly cash flow from rent and if at whatever point I sell and take the gain. What's a better scenario? (1) A cash flow of 1k a month for 24 months or (2) no cash flow for 24 month, but you sell at the end of month 24 and collect 30k? Well, the IRR formula will tell you which will yield the highest return. Even though I could have sold years ago and reinvested the money in a better cash flowing property with minimal appreciation, I might not have made as high of an IRR compared to keeping Brooklyn and waiting to collect the gain upon sale.

this is my first posting on this website and the past couple of people clearly have no idea what they are talking about(Brett and Greg)and have nothing better to do with their time. I'm a little disappointed in this forum.

Greg, as I said in my original post, my positive cash flow is 2k a month. I'm ok with you not being able to figure it out.

The banks I've talked to so far will lend up to 50%-60% of market value, so even in this scenario I'm still going to leave a bunch of money on the table.

The area of Brooklyn where I own my condo is very desirable.  Yes, the market will continue to increase.   I'm not sure about 10% every year, but 1-5% is reasonable. The worst it got in 2008 was that the market just stopped increasing and leveled out. It really didn't drop.

Cash flow today is my goal, which is why it's hard for me to just sit on equity(even considering the great appreciation).  Checking with everyone out there that I've done my analysis correctly and that my strategy/thinking is what an experienced investor would do?