HomeVestors Knows How To Use the Cash on Cash Investment Formula


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Rental property investors need to focus on the mathematics regarding cash flow when considering buying a rental property.

Dallas, Texas HomeVestors is the nation’s number one home buying franchise and has helped real estate investors purchase 50,000 properties over the years. The company knows that rental property owners need to understand their cash on cash investment and their cash flow. Determining this figure before purchasing a rental property allows investors to look around at different properties and pick the one with the highest cash on cash investment potential. This can categorize rental properties and allow investors to determine which properties are likely to be profitable and which need to be negotiated down before even considering them.

The cash on cash investment formula is quite simple and effective in determining the positive potential of an investment. The expected profit is divided by the cost of the investment and multiplied by 100. This gives us a figure that should at least be 8% in order to even consider investing in a property. Properties in the double digits can greatly reduce the risk and increase the profit potential of a property.

For example, if a rental property investor paid $500,000 for a rental property, they would need to make $40,000 a year in positive cash flow to obtain the magic 8% on their cash on cash investment. Anything greater than $40,000 a year in cash flow puts an investor in a desirable territory.

While the cash on cash investment formula is simple to use, finding the correct numbers to plug into the formula may be challenging. If a previous rental owner has accurate numbers regarding their cash flow, it could greatly alleviate the trouble of trying to estimate how much rent can be charged while taking the cost of maintenance into consideration.

Rental property investors could use the cash on cash investment formula to negotiate with individuals selling rental property, as they could likely relate to these numbers. Some may be willing to consider offers below their asking price in order to sell at a fair price.

Real estate rental property investors who use the cash on cash investment formula are likely to make a logical choice regarding rental properties they are interested in. This formula takes all emotion out of the decision and lets the numbers do all the work. This can greatly expedite the time spent considering which rental property is the best choice and gives an investor an idea of their positive cash flow throughout the term of the investment.

About HomeVestors of America Inc.

Dallas-based HomeVestors of America, Inc. is the largest buyer of houses in the U.S., with 50,000 houses bought since 1996. HomeVestors trains and supports its independently owned and operated franchisees that specialize in buying and rehabbing residential properties. Most commonly known as the “We Buy Ugly Houses®” company, HomeVestors strives to make a positive impact in each community. In 2012, for the seventh consecutive year, HomeVestors was among the prestigious Franchise Business Review’s “Top 50 Franchises,” a distinction awarded to franchisors with the highest level of franchisee satisfaction. For more information, visit www.HomeVestors.com.

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