Introduction to Residential Investment Property-Cash on Cash Return

There are a lot of websites and individuals who are promoting get rich quick real estate methods.  Although these methods have worked, it's a very small percentage of reality.  It's kind of like winning the lottery, we all hope it happens but the fact is its not likely.

Cash on cash return is probably the most important thing to consider when purchasing an investment property.  If your money will work better somewhere else it may behoove you to invest in whatever that may be.  Rental properties do have benefits that many investments don't.  Owning a hard asset!  You can literally drive by your property, or move into it if need be.  You don't have this option with stocks or bonds.

It's not unlikely to get 15-20% cash on cash return but when looking for investment properties its more likely to be in the 8-10% range.  In todays market this is a great return on your money!!  You also have the opportunity for appreciation which could easily catapult your earnings.  Real estate investing is a great way to put your money to work for you.  With the right property manager and the right property you will have little headaches and will consistently receive your rent payments.

If you were to invest 150k into a rental property in Colorado Springs you could likely get 13200 gross return.  This does not factor in tax write offs or appreciation which are very difficult to gauge.  These are conservative numbers.  If the right deal is found you could easily get 15000 or more per year.  Within 10 years your investment has paid itself off and you still have the hard asset sitting there.  Wouldn't it be nice to wake up in the morning and make 1100-1200 dollars to month for virtually nothing?!

Like anything, real estate has it's risks and some properties offer higher risk for a higher return on investment.  It's up to you to decide how "risky" you are willing to be.  If you are in your younger years it could be beneficial to find some higher risk higher return properties.  If you are getting close to retirement it's probably a better idea to be conservative with your investment and keep a consistent income.  Remember, all investments are a risk!  One of the most reliable forms of return is to put your money in a bank account and leave it there.  Unfortunately your money will grow at a snails pace and the chances of being able to get enough interest to live off of is unlikely. 

In my opinion, investing cash into real estate is rewarding and profitable.  Make sure you have an expert property manager and the funds to keep up with the property and you will be pleasantly surprised by your returns. 

Sincerely,

Daniel Muldoon