However, if you plan on living in your existing house and when you convert the basement you can rent out for an additional $1,500 then your cash on cash return of your $50,0000 would be 36% (18,000/50,000), which is a great ROI.

Leverage magnifies return. 3) The effort involved in adding an ADU is comparable or larger than a rehab associated with a BRRRR.

The idea is to expect a negative cash flow, however bank on the growth to achieve a good return.

I have to caution would-be investors: Don't count on the returns they say they expect to achieve.

********************************The basic idea is that of you can make the same return on Treasuries with little to no risk, there is no incentive to buy real state.Some very large Hedge Funds are selling inventory at a loss, below what "current market" is.

Most of my houses earn around 30-40% total return year after year.  

Even in up and coming neighborhoods, you can find vacant run down houses and turn a "quick" 20-50% return.

Purchase price: $530,000 Cash invested: $100,000 My journey into short-term rentals began after years of investing in long-term properties, but it was a podcast that opened my eyes to the incredible potential returns of STRs.

@Jay Hinrichs which BTW, 6% is high.

I create a simple spreadsheet and compare my CoC return and Return on Equity (ROE).