The Cash on Cash formula and % is pretty straightforward, but how does this % change year over year?
For example, in the first year, I have the downpayment, the capex to rehab / make ready the house, etc. Then I rent the house out and compute my Cash on Cash returns based on those expenses to get to a percentage.
For me, if that % is in the 12-15% range (or hopefully even more :)), I have a deal i may be interested in.
Let's say in year 2, the rent stays the same. Obviously the $ i have to spend on the house are probably less than the year 1 down payment and rehab costs.
How does that number change year over year?
When people talk Cash on Cash returns, are they really speaking to the first year Cash on Cash or are they looking at it over a longer period of time? (for example, if 8 years in, I need to do a $10,000 roof replacement, that would obviously change the % for that year and for the whole ownership of the house if I'm keeping good numbers)