What’s a Good Cash on Cash Return for Property?
Obviously, higher returns are better and lower returns are worse. This is also generally true of cash-on-cash return. …HOWEVER, which I will discuss….
A good or bad cash-on-cash return will depend on your personal preferences and goals for a particular property. Are you looking for property appreciation or property cash flow? I have some properties at a 11.5% Net (on the lowside) currently cash-on-cash return that I’ve been very happy with and up to 16% Net on some out liers in which I bought right and created value.
My recent Brothel is a good example even at a time so many are thinking the sky will be falling down on property.
Years ago in the US, I had rentals in which cash-on-cash return was even higher that I wanted to get rid of because of other problems, hassles, and a lawsuit in which unknown to me that tenants were running a lunch truck catering business from the home. They had a knock on the front door in which they answered & were promptly robbed & shot. To this day I can even comprehend how a lawyer could even think they had a case but they filed a negligence lawsuit & were awarded money by my insurance as they thought it was cheaper to settle.
Going forward, It’s is tricky to identify a “good” or “bad” cash-on-cash return because the results from this formula can be misleading. As I was referring to my bantering, some rougher areas seem to offer higher cash on cash returns. However they also offer higher aggravation rates of returns. Take into account if you are not on a social housing contract, you probably can have problematic tenants.
My model is very simple. Both on a personal belief basis as well as business, I focus on Social Housing. I will not go into war zones looking for high cash on cash yields but lower to middle income areas in which there is pride of ownership.
Key words, pride of ownership, not a landlord patch.
I like buying in the NE currently. I have been buying in areas of first time buyers and those going into care homes. I look to buy at prices below the 2008 peak and look to have strong cash flows of double digits with social tenants in which the council, charity or PLC actually manages the tenants with no voids, no managment and no maintenance. This way I can continue to focus on buying more properties. As I am a long term investor, I look to buy right as a pose to read the fear in the newspapers on online. The name of the game is cash on cash returns, compounding money over long periods of time and low leverage. This way regardless of what happens in the property market I am compounding money.