Monday, July 26, 2010

What Returns Do I want?

I guess, I am a bit more agressive these days. 

  1. From a non leveraged real estate or stock market investment - long term I expect a 10-12% return per annum.
  2. From MICs I want at least 8%; less I won't touch.
  3. Leveraged real estate requires an annual return of 15 to 22%
  4. Passive JV's depending on risk level and LTV (experience of operating or active partner, investor exposure to mortgageg liability, operating liability, etc) 15% to 30%.
  5. With debt obligations from major banks I am willing to go as low as 6% with inflation protection and less than a 5 year maturity. For higher risk corporate obligations I want at least 10% plus the chance of significant appreciation.
If you think that that is unrealistic, you may be right but those are my criteria. What I will end up getting in the real world is of course a different matter. Overall, though, if I can't get returns like that in this market, why bother?

I don't look at only the cash flow component of an investment. I am mostly concerned with ROI and a minimum positive cash flow (i.e. $100 per month per door). In terms of cap rates, my minimum is 4% - that would mean that with zero leverage I expect as a minimum 4% net cash flow. Same for dividends (4% minimum).

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