I’m looking to buy my first cashflow positive place and I was wondering what you all think the minimum cash on cash return for both residential and commercial should be.
I’ve found a commercial that’s 9.4% net. It’s better than my ING account but is it enough?
Tigersimmo
TS
Hi TS,
9.4% return on Commercial is good – its hard these days to find that kind of return on a commercial investment although you can still find ones with returns of 14% and greater.
There is no minimum CoCR – be craetive in your deals and anything is possible. It all deoends on what you wnat. You can find somethig with 20% return but with much risk involved – do you want the risk for a greater return? You can get something with a 8 or 9% return with very minimal risk – do you want less risk? – evaluate your options!
Also, depends on the area and future plans, capital growth and otehr surrounding factors…
Kind Regards,
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hi TS and Geo
thats an interesting deal TS, but you need to find out what the cost of the money (mortgage) will be, usually the banks will charge you more for a commercial deal. Also be aware that you may need to put 30-40% into the deal. Sometimes this can destroy what looks like a great deal suddenly look average. Obviously with commercial deals often it can be only as good as the leasee. Vacant commercial properties can be a real drain on the finances.
To be honest i like at least a 15% Cas on Cash return. Not many of my properties are achieving that at the moment. They were when i bought them, but that was a few years ago and as prices go up but rents don’t the yeilds drop so i’m selling some to find higher returning ones.
what returns do others want
Regards westan
I live in New Zealand and for a fee find cash positive deals there, email me at [email protected] to join our database
westan,
Do you calculate CoCR on a 20% deposit? I don’t use CoCR- it’s too variable- it could be done on a 10%, 20%, 30% or more deposit… so when people talk about it, to me, I am never sure how much deposit people have put in.
As for me, 7.5% gross on purchase price is the next IP I have in mind.. plus depreciation should push gross % up further.
kay henry
Hi kay
sorry i should have said that
Yes i’m talking about with a 20% deposit. As i invest for cash flow i have to go for high returns, but i don’t believe i buy risky properties (risky areas).
regards westan
I live in New Zealand and for a fee find cash positive deals there, email me at [email protected] to join our database
Thanks westan
I’m not sure a 15% return is so good given that it’s after a 20% deposit (mind you, it’s far better than what I get!) On sales price, that would be like around 12% yes? Oops, I just edited this… I wanted to say, I mean the yield is not so good… because you are buying for yield rather than growth properties (even though these might effect some growth too).tigersimmon… if you will be yielding 9.4% CoCR.. are you calculating that after a 20% or 30% deposit? If so, on purchase price, you’ll be achieving about a 7% yield on purchase price.
kay henry
I’m not sure a 15% return is so good given that it’s after a 20% deposit (mind you, it’s far better than what I get!) On sales price, that would be like around 12% yes? Oops, I just edited this… I wanted to say, I mean the yield is not so good… because you are buying for yield rather than growth properties (even though these might effect some growth too).You must be logged in to reply to this topic. If you don't have an account, you can register here.
