How to Achieve 6-8% Cash-on-Cash Returns in Multi-Family Real Estate

How to Achieve 6-8% Cash-on-Cash Returns in Multi-Family Real Estate

One of the most common questions I hear from investors who are stepping up from single-family to multi-family real estate is some version of this: I can't make the numbers work. I'm looking at 4-plexes and small apartment buildings and everything is breaking even at best. Is 6-8% cash-on-cash still realistic?

The honest answer is yes — but not with the same approach that worked five or ten years ago. Let me walk through what actually determines your cash-on-cash return on multi-family property and where the leverage points are.

First: What Cash-on-Cash Return Actually Measures

Cash-on-cash return (CoC) measures your annual pre-tax cash flow as a percentage of the cash you invested out of pocket. If you put $100,000 into a deal (down payment + closing costs + initial capital improvements) and the property generates $7,000 in net cash flow after all expenses and debt service, your CoC is 7%.

It's distinct from total return (which includes appreciation and equity paydown). CoC is a pure measure of the cash your money is generating right now, which is why it's the metric most investors use to evaluate whether a deal makes sense on a monthly basis.

Why 6-8% Is Hard in Most Markets Right Now

The challenge isn't complicated to diagnose. In the low-rate environment of 2020–2022, you could borrow at 3–4% and collect rents that produced comfortable CoC returns even at elevated purchase prices. Today, debt costs 6.5–8% depending on the product, and purchase prices haven't corrected proportionally in most markets. The math is compressed.

If you're running the numbers on 4-plexes in Texas, Florida, Ohio, or Indiana — which are some of the most discussed markets in multi-family investing communities — you're finding the same thing many investors report: you're getting to breakeven or slight positive cash flow, not 6-8% CoC.

That doesn't mean 6-8% is impossible. It means you need to be more deliberate about where you look and how you structure deals.

Market Selection Is the Biggest Variable

Property taxes and insurance are the two operating costs most investors underestimate when they're comparing markets. Both are highly location-dependent and directly compress your CoC.

Texas property taxes, for example, run 1.8–2.4% of assessed value annually in many metro areas. On a $400,000 4-plex, that's $7,200–$9,600 per year in taxes alone before you touch insurance, maintenance, vacancy, or management. Florida has shifted its insurance market significantly since 2021 — multi-family insurance rates in coastal and South Florida counties have risen 30–60% in many cases. Utah and Arizona have high per-door acquisition costs, which inflates the capital you need to put in (and thus the denominator in your CoC calculation).

The markets where Midwest investors have historically found better CoC: Ohio, Indiana, Kansas City, Memphis, Birmingham, and parts of the Carolinas. Lower entry prices, more moderate property taxes, and stable enough rental demand to support reasonable occupancy. Lower appreciation upside, but the CoC math often works where coastal markets don't.

Deal Sourcing Determines Your Purchase Price

Here's the thing most people miss when they say they "can't make the numbers work": they're looking at properties listed on the MLS at retail prices, with motivated sellers and competitive buyers already baked in. You cannot reliably achieve 6-8% CoC on retail multi-family acquisitions in most markets right now. The pricing doesn't support it.

The investors who are hitting 6-8% in today's environment are largely doing it through off-market and distressed sourcing:

• Direct mail and outreach to owners — targeting landlords who've owned for 10+ years, may have tired of management, and haven't listed because they don't want the process
• Broker relationships — commercial brokers who work with institutional and high-volume investors often have off-market opportunities before they're listed; but you need a track record or credibility to be in that conversation
• Distressed and value-add — properties with high vacancy, deferred maintenance, or management problems that are priced for their current performance, not their potential
• Wholesaler networks — especially for smaller multi-family (2–8 units), investor-to-investor wholesale channels can surface deals that never hit the MLS

If you're relying only on listed properties through the MLS or LoopNet, you're seeing what everyone else sees. Off-market sourcing is what creates the purchase price discount that makes the CoC math work.

How You Structure the Financing Matters More Than Ever

At current interest rates, the loan you use determines your monthly debt service, which is the biggest line item in your operating expenses. A few financing approaches that can improve your CoC:

Seller financing. If a seller has owned the property free and clear (or has low existing debt), they may be willing to finance the purchase themselves at a below-market rate. Sellers who don't need the cash and want installment income often prefer this to a lump sum. Seller financing at 5-6% when the bank is at 7.5% is a 150-200 basis point improvement that significantly changes your CoC calculation.

Assumable loans. Some existing mortgages, particularly FHA and VA loans, can be assumed by a buyer under the original terms. If a property has an older FHA loan at 3.5%, assuming that loan gives you a cost of capital the market won't offer you today. These deals are harder to find but worth actively searching for.

Creative short-term structures. Interest-only periods, bridge loans with quick refinancing, or short-term seller carrybacks can reduce initial debt service while you stabilize the property. These are more complex and carry their own risks, but they can make a deal viable in the short term that wouldn't pencil on permanent financing at today's rates.

The 1031 Exchange Consideration

For investors deploying 1031 exchange proceeds — deferred gains from a prior sale that must be reinvested in like-kind property within specific timelines — the math compounds in a frustrating direction. You're under time pressure (45-day identification window, 180-day closing window), which limits your ability to wait for the right deal. And because you're reinvesting deferred gains, you often have more capital than you'd normally invest in a single asset, which pushes you toward larger properties with higher entry prices.

If you're in a 1031 exchange and struggling to find qualifying properties that hit your CoC targets, a few options:

• Consider DSTs (Delaware Statutory Trusts), which allow 1031 proceeds to be invested passively in larger commercial properties without the typical operating burden
• Expand your geographic search radius — your prior market may not support your CoC targets, but another region might
• Work with commercial brokers who specifically serve 1031 buyers; they maintain deal flow for exactly this use case
• Revisit your target CoC — if the choice is triggering the tax event vs. accepting 4-5% CoC on a high-quality property, the after-tax calculation may favor the lower CoC deal

What 6-8% CoC Actually Requires Today

To summarize what I see in investors who are genuinely hitting 6-8% CoC on multi-family in the current environment:

1. They're buying below retail — either off-market, distressed, or in markets that haven't fully repriced for the higher-rate environment
2. They're operating in markets with favorable expense ratios (moderate property taxes, reasonable insurance, stable renter demand)
3. They have below-market financing — either through existing assumable loans, seller financing, or relationship-sourced bridge capital
4. They're adding value — buying at a below-stabilized-value price and improving operations or occupancy to close the gap

None of these are impossible. But none of them happen by browsing LoopNet and running numbers on listed properties at asking price. The market has repriced, and hitting your CoC targets requires a more active deal-sourcing and structuring approach than it did in 2020.

That's the real answer. The investors finding the deals still exist. The ones who "can't make the numbers work" are usually looking in the wrong places or underestimating how much the deal structure matters.