https://www.biggerpockets.com/renewsblog/2013/06/05/cash-on-cash-return/
Properties with deferred maintenance issues will naturally have a higher cash flow. Money is not going to the correction or maintenance of the property. But if you purchase that property based just on those high cash on cash returns, guess who will be stuck with the delayed repairs? Not understanding the calculations or factors that affect the calculation of investment metrics can easily cost you in the end.
Here is another scenario. You are interested in another multifamily property and your agent has obtained the first year of operations from the owner’s Proforma. Using this data you have made some projections for the future years based on your assumptions for the property. How sure are you of your assumptions? What would happen if they were wildly incorrect? How would that affect the cash on cash return?
