Rental property return benchmarks
When I first got into real estate and started analyzing deals, I really didn’t enjoy using any of the online calculators or spreadsheets that were available.
They all had the same problem.
They were too complex.
And that’s coming from a guy who is a complete numbers nerd…
I felt deals could be analyzed in a more simple way, quicker, and easier, while still being accurate.
I say the same thing for return benchmarks.
When I hear investors explain their return requirements, nearly all of them have a laundry list of complex requirements that a property must meet.
For me, that just didn’t work.
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So, I boiled it down to two return numbers: Monthly Cash Flow Per Door and Cash on Cash ROI.
Are there other things that matter?
Absolutely.
But, I’ve found that when these two numbers meet my benchmarks, the rest of the return numbers tend to take care of themselves.
From there, I defined what was the minimum return I’d accept for those two metrics.
For Monthly Cash Flow Per Door, my benchmark, or minimum return, is $200 per month in net cash flow (that’s after setting money aside for reserves).
For Cash on Cash ROI, my benchmark, or minimum return, is 20%.
That’s not to say I’d never buy a deal that has a lower Monthly Cash Flow Per Door or Cash on Cash ROI, but in general, I pass on deals that don’t meet these two criteria.
Would you accept lower return numbers? What are your benchmarks? What else is important in a deal that you look for?
All the best,
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