5 plex with ~33% Cash on Cash return good?

Hi guys, just want a little confirmation, as this is the first deal I ran numbers on and wanna know what you guys think.

It’s a 5 plex that the seller is willing to finance himself 25K down, I got all the expenses, Gross effective income, calculated a conservative NOI and after all was said and done the Cash on Cash was 36%, give or take a few percentages. with cash flow potential ~$700-800 depending on where we strike for monthly payments.

I ran this by a local REIA owner and will see him Thursday about the deals numbers.

A quick question is, I wanna get a partner on the deal to finance the 25K down, and split the cashflow and give him a generous return on his investment when i Refi out a year or 2 later. I read Investors will go for it, but when I proposed it to my Friend (who owns the reia) he said most investors he knows prefer to pay a quick wholesaling fee and be done with it. But I really want the cashflow.

Anybody here structure a deal where you keep a majority or the cashflow and paid the investor off at the backend?

That is the way a lot of multifamily deals are structured. This allows them to raise the 20% to 35% to put down on a $7million or $8million apartment deal. I would think that this deal is too small for the effort. Anybody that can do this deal can just do one by themselves and not go through the bother. Maybe there is someone that does not have any time with some extra cash sitting around.

hhhmmm, what do you suggest I do? I don’t really have 25K to put down right now. Hard money for the 25K maybe?

Cash on cash return is not necessarily a good indicator of the quality of the deal. If you want to know if this is a good deal, we need to know the purchase price, gross monthly rents, and the interest rate being paid on the loan. If you post those numbers here, I’ll give you my opinion.


Mike, assuming that all the numbers are in order to get a cash on cash of 33%, why is this not a good indicator?

Or are you thinking that there might be problems with the assumptions that are being used to arrive at this number?

If all the assumptions are valid, then it would seem to me that a 33% cash on cash return would be a very good deal.


I’m interested to hear Propertymanager’s response but I believe it’s because a cash on cash return is a measure of the deal with your involvement which is why it’s not “necessarily” a good measure, but other measures like cap rate, gross rent multiplier, debt coverage ratio are measures of the deal as it stands on its own. it’s important to understand how other deals are being done in your area do know whether it’s a good deal… and as far as the $25k it’s too small for traditional hard money lenders but you can absolutely network your way to someone with the extra cash

Not sure I follow that at all. It doesn’t matter to me how other deals are being done in my area. If I can get a 33% return on my money, ( if his numbers are accurate ), I’ll take that all day every day. If the deal has that kind of room with putting money into it, it should be fine if you have to borrow the money as well.


sorry it took me a while to respond, but i was on vacation.

anyway, I got some more information and some more accurate numbers.

PITI:1546+100 (water)+140 (electric)= at minimum 1786 a month= 21432 a year

Gross potential rent: 2325 a month= 27900 a year if you keep it at 100% occupancy (which it’s at right now, but i realize you can never count on 100% occupancy ever)

So if everything goes perfectly you’re looking at 539 a month without a property manager. Sooo in retrospect I suppose it’s not such a great deal for me. But seems to be good for people who want to manage properties themselves and have a lot of experience doing so.

one good thing, is the interest rate is set to adjust down to market level next month from 8% down to ~5% which should shave some money off. One bad thing though is the taxes are a little low, but shouldn’t be evaluated for a while but when they do will put $100 a month onto your property taxes.

Pros: only 25K down, interest rate to adjust down.
cons: slim cashflow with a property manager, taxes low, final purchase price is decent but not great (~160K comps at ~$170K)

Without knowing your exact purchase price and the interest paid,
I’m assuming @ $225,000 price at 7% or so.
Monthly rental of $2325 gives us the following.
8% vacancy $186
Property tax $220
Insurance $188
That should give you about a $188 monthly cash flow.
But, that’s without any CPA for yearly taxes, maintenance, utilities, appliances breaking down, plumber, etc.
If you just add one or two of the unknowns, you rapidly fall into a negative cash flow.

If you don’t have the 25K up front, don’t think you will have a way out when things turn sour, or it’s time to evict a tenant that did not pay you for the past 2-3 months, etc, etc.

If it’s such a great deal, makes me wonder why no other fat whale has jumped in the water on this one.


yeah i decided to drop the deal. Wrap around wouldn’t work. He’d be willing to sell outright for ~160K. Btw, while on the subject of interest rates, is 7% the typical interest rate you’ll get? if so, why is it so much higher than the market rate?

You can’t really compare rates on NOO properties to what you’d get for your personal residence. They’re completely different. We just shopped around this week for NOO lending. We were quoted from 6.5-7.75% and that was from the few banks that would actually still lend for investment properties.

Alright then, I’ll make sure to put 7% down in my numbers then.