Property & Financing
Income & Expenses
Monthly expenses include property taxes, insurance, maintenance, and management fees. Vacancy rate accounts for unoccupied months between tenants.
Your Numbers
What Is Cash-on-Cash Return?
Cash-on-cash return measures the annual pre-tax cash flow relative to the total cash you invested. If you put $37,500 down on a $150,000 property and your net annual cash flow after mortgage, expenses, and vacancy is $4,200, your cash-on-cash return is 11.2%. It tells you what your actual dollars are earning, not what the property earns on paper.
This matters because most investors use leverage. A property might have a 7% cap rate but generate an 11% cash-on-cash return with financing, or a 3% return if the interest rate is too high. Cash-on-cash return accounts for the cost of borrowing. Cap rate does not.
What Is a Good ROI for Memphis Rental Property?
Most experienced Memphis investors target 7% to 12% cash-on-cash return. Below 7% and you are taking on landlord risk for a return you could get from a REIT without the work. Above 12% and the numbers should make you skeptical: either the rent assumptions are optimistic, the expenses are understated, or the property carries more risk than the spreadsheet shows.
The right target depends on your situation. A turnkey property in Cordova at 8% with a reliable tenant and low maintenance is a different investment than a value-add in Binghampton projecting 14% that needs $15,000 in rehab and a tenant placement. Both can work. Neither is automatically better.
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