Cash on Cash Return Rate?

[tnguyen]

I`m wondering what is the expected Cash on Cash Return rate that most investors satisfy with: Min rate=?
Also, how about a capitalization rate? Min rate=?
Do most investors focus on Cash-on-Cash return rate or Pre-sale ROI or Post-sale ROI?
What is the minimum ROI rate required?

 

[Thomas Beyer]

QUOTE (tninvestor @ Apr 3 2010, 05:21 PM)
...

What is the minimum ROI rate required?


ROI:



above 0 .. preferrable double digit POSITIVE ROI .. or triple digit in 4-6 years ..



The issue is that you do not know the true ROI until you sell .. usually many years later !



CAP rate:



over 4% in big cities like Vancouver, Calgary, LA, Toronto, Singapore, Munich, London ..



over 6% in 2nd tier cities like: Edmonton, Kelowna, London (ON), Halifax, Red Deer, Winnipeg, Saskatoon, Karlsruhe, Kassel, Edinborough, Dublin, ...



over 7.5% in other towns/city ..



A longer analysis on equity growth is in my blog in October 2009 'Equity Gain is not the only way to make money"

 

[tnguyen]

QUOTE (ThomasBeyer @ Apr 3 2010, 08:31 PM) ROI:

above 0 .. preferrable double digit POSITIVE ROI .. or triple digit in 4-6 years ..

The issue is that you do not know the true ROI until you sell .. usually many years later !

CAP rate:

over 4% in big cities like Vancouver, Calgary, LA, Toronto, Singapore, Munich, London ..

over 6% in 2nd tier cities like: Edmonton, Kelowna, London (ON), Halifax, Red Deer, Winnipeg, Saskatoon, Karlsruhe, Kassel, Edinborough, Dublin, ...

over 7.5% in other towns/city ..

Thank you, Thomas. It`s very helpful info.
How about Cash-on-Cash Return rate? What is the minimum rate? Are most REIN Grads based on "Cash-0n-Cash return rate" to purchase the property?

 

[gwasser]

QUOTE (tninvestor @ Apr 4 2010, 12:36 AM)
Thank you, Thomas. It's very helpful info.

How about Cash-on-Cash Return rate? What is the minimum rate? Are most REIN Grads based on "Cash-0n-Cash return rate" to purchase the property?






Check out my posting on: http://myreinspace.com/public_forums/General_Discussion/61-16161-Comparing_apples_and_oranges.html=



It discusses real estate returns in more detail.



Cash-on-Cash return is basically Annual Cashflow (hopefully positive)/your down payment or cash invested in a property.

This may give you an impression as to how you are doing compared to money market fund returns or GICs or dividends on stock.



It is a pretty volatile number that is a function of LTV, the cost efficiency of your rental management, market rents and property value. With Cap Rates of 3 to 4% in cities such as Calgary, getting cash-on-cash returns of 1 or 2% is pretty good for newly acquired properties. In other markets that may be considered a horrible return.

 

[Thomas Beyer]

QUOTE (tninvestor @ Apr 4 2010, 12:36 AM) Thank you, Thomas. It`s very helpful info.
How about Cash-on-Cash Return rate? What is the minimum rate? Are most REIN Grads based on "Cash-0n-Cash return rate" to purchase the property?
0 is a great start .. as you will come out ahead in time. Higher is better, of course !

It also depends what expenses are used. Many properties require ongoing upgrades that improve value and achieve higher rents but lower the initial cash-on-cash ROI.

I think you ask the wrong question. The better question is:
I have X $s to invest and Y amount of time per month. What is the best property class / area I should buy ? i.e. 4 townhouses or one acreage or a 8-plex or a suited up/down bungalow !

 

[tnguyen]

QUOTE (ThomasBeyer @ Apr 5 2010, 10:25 PM) 0 is a great start .. as you will come out ahead in time. Higher is better, of course !

It also depends what expenses are used. Many properties require ongoing upgrades that improve value and achieve higher rents but lower the initial cash-on-cash ROI.

I think you ask the wrong question. The better question is:
I have X $s to invest and Y amount of time per month. What is the best property class / area I should buy ? i.e. 4 townhouses or one acreage or a 8-plex or a suited up/down bungalow !

Your questions lead me to many other answers, thanks Thomas.
Anyway, most of the investors are expecting that the higher the Cash-on-cash return the better. Thus, most investors set their minimum cash-on-cash return rate before they invested, of course 1% or higher is better than 0%. Mr. Wasser`s answers are more direct to my questions. Thank you everyone

 

[julieCEO]

Well i focus on profit rather than ratio. If you invest then don`t worry about ROI. Just care that you should not go in loss. Then all is well. It is great if you are earning some thing.

 

[Rickson9]

Profit is nice. But a return is just as important. It`s great to make $1 a month in profit, but if I invested $1000, that 0.1% return isn`t very appealing.

 

[housingrental]

Hi Julie
I`d be happy to offer to borrow money from you with offering you a guaranteed profit!
From your last post I trust this works for you regardless of rate?
Lets get something together, please email me!
Thanks


QUOTE (julieCEO @ Apr 10 2010, 12:16 PM) Well i focus on profit rather than ratio. If you invest then don`t worry about ROI. Just care that you should not go in loss. Then all is well. It is great if you are earning some thing.

 

[ChrisDavies]

I find people quite like the 10% number. Simple, gets into double digits without seeming insane/risky.