Dave - thank you. Actually I ran an analysis and found that property 2 will always have a better cash on cash return… At first (before running the numbers) I was under the impression that because property 1 had a bigger cash flow, eventually the cash on cash return of property 1 would pass property 2. This doesn’t happen… Actually property 2 will always have a bigger cash on cash return (even after 100 years).
This happens because the difference in the cash flow is not enough to compensate for the difference in the initial investment. The $240 cash flow is only 50% higher than the $160 cash flow. While the initial investment of $25,000 is 67% higher than the $15,000 investment in property 2.
Dave - thank you for clarifying… Interesting stuff…