Ready to Invest??? Cash on Cash and How to Make a Smart Real Estate Plan

Posted by TM5 Properties Agent on Monday, February 29th, 2016 at 3:26pm.

Many people ask me whether I think investing in real estate in the Brazos Valley is a safe bet… and my answer is always ‘there are no safe bets but there are strategic plans’. Most of my investors have chosen Bryan/College Station for the stable growth focused around Texas A&M University, the new Medical and Law Schools, and the Bio-Research Corridor. With TAMU having the expectation to accept over 60,000 undergraduate students by 2020, student housing is growing by staggering leaps. In fact, even TAMU is partnering with large firms to build housing close to, but slightly off campus property. But if you have a student, or were ever a student, you know that dorm and/or apartment housing is only appealing for so long. Most students yearn for a little more freedom, and a dog, so they search out homes that are close enough to walk/ride a bike or on the bus route. And this is what has created and continues to fuel the real estate frenzy in the Brazos Valley.  

We know that real estate close to the University is appreciating steadily at a minimum of 5% (depending on location and home quality), but my investors want more than just value appreciation… they want cash-on-cash returns. So let’s discuss cap rates vs. cash-on-cash. Cap rates are extremely market specific and so what is great in Dallas doesn’t always fit the mold here in Bryan/College Station. This is why my investors focus on cash-out and cash-return – this allows them to qualify whether a return is healthy. A Cap rate does not tell you how much return you are making on your investment (unless it is a cash purchase, in which case the cap rate and cash-on-cash returns are the same).

Looking at cash-on-cash return allows you to estimate the actual return on your investment rather than just explaining the relationship between the purchase price and the income it brings in. So let’s do a calculation:

Annual NET Income (include mortgage)/ Total amount invested = Cash-on-Cash Return.

If you mortgaged your property, the total amount invested includes closing costs and the down payment – your cash out at the closing table. If you rehab or renovate the property be sure to add those costs into this amount.

Whatever number you calculate – this is your return. Let’s look at an example:



What a return!!! So if you are interested in investing – NOW IS THE TIME! Take a look at these incredible Investment Opportunities - they won't last long:

1106 Marsteller - 4/4 in Eastgate or  703 Wellesley - 4/4 Duplex in Eastgate or 2410 Pintail Loop 3/2 Home on Bus Route

Contact Hanna Hayes – 512.373.6322 or Hanna@TM5Properties.com for more details on how to take advantage of our incredible housing market!

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