P
Precisepm
New Member
What ROI are investors looking for when investing in the US?
So 10 to 20 %. As a realtor your comments are really interesting .thanks Interesting to hear from more people .. ROI. LTV %yield cash flow analysis .. What do others think?HFCFI said:That's a very good question but one that has a lot of different angles. The general idea is that the cap rate on the property is the property's ability to generate income but your ROI will be greater or less depending on the financing that you put on that very same property. If you're positively leveraged, meaning that your interest rate is lower than your cap rate, then your ROI will go up. If you are negatively leveraged, meaning that your cap rate is lower than your interest rate, then the more money you borrow, the lower your return on investment goes. So to answer in general I would say that investors who are looking at houses in America are generally looking at between the 6 - 10 cap rate for houses. Usually, the lower the cap rate, the nicer the property. It'll be newer, located in more urban or populated environment that is closer to jobs. Higher cap rate properties will usually be older and in more rural markets, or maybe they are more distressed type of sales situations. So when you're working with a 6-10 cap rate, your ROI could be much higher or much lower depending on what your financing looks like and how much money down you have put into a property. If you are buying a property with very little money down and you are positively arbitraged, you could have an enormous ROI. It's possible that you could get 50, 60 or even 100 percent annualized return on investment if you've got very high leverage on a positively arbitraged house. Also you could have a very low ROI if you've got no leverage or very upside-down leverage on a house that is costing you more in interest than what your earnings are in cash flow from the property. So generally, conservative investors in America are looking for ten to twenty percent return for their houses and I think you can actually generate a higher return on investment depending on the deal structure that you put together.