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Investing in South Florida Real Estate – Cash on Cash Return

Many of us have always wanted to own an investment property. Buying a future investment property means researching all avenues of the sale prior to actually making an offer. Though we all wish that we could buy these properties for cash, most of us will need to borrow the money from a lender. So our true investment in the property comes as your down payment. Typically this is between 25% and 30% for investment properties. Lets take a look at Cash on Cash Return when looking at Fort Lauderdale Homes for Sale or any of the beautiful surrounding neighborhoods.

The return we make on the actual cash you invest is considered your Cash on Cash Return:

Cash on Cash Return:

Purchase Price: 300k
Down Payment: 90k (30%)
30 Year Loan @ 5.5%
Monthly Payment: $1,192.36 ($14,308.32 Annually)
Net Annual Income: $16,300 (monthly rent – $2100 minus taxes, insurance, estimated repairs allotment)
Net Annual Cash Flow: $1,991.68 ($16,300 – $14,308.32)
Net Cash Flow: 2.21%

This is the actual return of cash based on the $90,000 (down payment) that we actually investment towards the home.

Now, there are of course other factors that you need to take into play. Such as the closing costs associated with the financing. On the positive side, you need to look at the principle that is paid down monthly with the mortgage payment, as this will increase your Net Cash Flow. There are also tax deductions that can be taken annually to increase your Net Income on your property.

Anytime you are looking at investing your money it is important to look at all cash flow avenues to ensure you are making a solid return on your cash invested.

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