Lowell Real Estate Investing & Real Estate Financial Planning™ Podcast · James Orr

Secrets of Cash on Cash ROI and Cap Rates

·41 min·2 clips

Increasing rent by 10% improved cap rate by 13.39% in the spreadsheet example.

1. Lowell Real Estate Investing & Real Estate Financial Planning™ Podcast covers “Secrets of Cash on Cash ROI and Cap Rates” in a Real Estate Investing Secrets course module. 2. Jim Fleer opens the session and James Orr leads the lesson because Orr explains the deal-analysis formulas and spreadsheet outputs. 3. The episode asks how cap rate differs from cash on cash return on investment and why investors choose one metric over the other. 4. Orr defines cap rate as net operating income divided by purchase price, or current value for an owned property. 5. Orr defines cash on cash return on investment as cash flow divided by the total cost to close or total cash invested. 6. Orr says cap rate ignores financing completely, while cash on cash includes mortgage payments and PMI. 7. Orr says cap rate is preferred by institutional investors and analysts comparing properties across different markets. 8. Orr says cash on cash return is preferred by individual investors focused on leverage and cash flow. 9. Orr says NOI and cash flow are only equal when a property is free and clear and financing equals zero. 10. Orr says the relationship matters when comparing multifamily properties, including 14-unit, 27-unit, 74-unit, and 102-unit buildings. 11. Orr says the spreadsheet shows cash on cash ROI and cap rate on the main dashboard for years one through five. 12. Orr says the overrides tab shows those same calculations for all 40 years in the cash flow section. 13. Orr walks through the NOI formula as gross operating income minus operating expenses. 14. Orr breaks gross operating income into gross potential income minus vacancy. 15. Orr names rent, laundry, storage, taxes, insurance, HOA fees, landlord-paid utilities, maintenance, and property management as inputs. 16. Orr says a 10% rent increase improved cap rate from 4.913 to 5.571 in his example. 17. Orr says reducing vacancy by 10% changed cap rate by only 0.4%, while reducing property insurance by 10% changed it by 0.65%. 18. Orr speaks in a teaching style with spreadsheet visuals, repeated formula recaps, and direct comparisons between metrics. 19. Investors comparing multifamily deals, leverage, and cash flow. 20. Listeners wanting a story-driven market episode should skip it.

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