Folks, the most common thing I hear from investors stepping up from a single rental to their first 4-plex is some version of this: "Chris, I can't make the numbers work. Everything I look at breaks even at best. Is 6-8% cash-on-cash even real anymore?"
I'm 60 years old, I taught high-school English for ten years before I ever owned a building, and I'm the cheapest guy you'll ever meet, so believe me when I tell you the honest answer is yes — it's real. But not with the approach that worked five years ago, and not by browsing listings and praying. Let me walk you through exactly what moves the number on a multi-family deal, using real buildings my students have worked here in central Illinois and real dollars, because the numbers are sacred and I'm not going to wave my hands at you.
First, what cash-on-cash actually measures
Cash-on-cash return is just your yearly cash flow divided by the cash you put in. That's it. If you sink $100,000 into a deal — down payment, closing costs, and the money to fix it up — and after every single expense and the mortgage that building hands you back $7,000 a year, your cash-on-cash is 7%. Plain dollars over plain dollars.
It is not your total return. Total return folds in appreciation and the principal your tenants pay down for you, and those matter plenty — I broke that whole thing apart in my piece on appreciation versus cash flow in rental property, and you ought to read it, because confusing the two engines is how folks talk themselves into a bad deal. But cash-on-cash is the cleanest measure of what your money is doing right now, this month, in your pocket. That's why I lead with it.
Why 6-8% got hard
The diagnosis isn't complicated. Back in 2021 we were borrowing at 3.5% and renting at prices that left room. Today my students are getting quoted 7% to 7.5% on commercial multi-family paper, and purchase prices around here haven't dropped to match. So the spread between what the building earns and what the bank charges got squeezed thin.
I'll show you on a real one. A guy I mentored brought me a 4-plex over in Peoria last fall, listed at $360,000. Four units renting at $850 apiece, so $3,400 a month coming in, $40,800 a year. Sounds fine until you start subtracting. Put 25% down — that's $90,000 — and finance $270,000 at 7.25%, and the mortgage alone runs about $1,840 a month. Now take out Peoria County property taxes, and Illinois taxes are no joke, that building's bill is right around $6,800 a year. Insurance, another $2,400. Then you set aside 8% of rent for vacancy and a real chunk for repairs, because the place was built in 1971 and old buildings cost what they cost.
When we ran it cold together, that 4-plex was netting maybe $1,800 for the whole year on $100,000 all-in. That's under 2% cash-on-cash. At asking price, that deal does not work, and no amount of optimism fixes it. So he passed.
That's the trap most folks are stuck in. It's not that 6-8% is gone. It's that you cannot get there on a retail-priced building. So let's talk about the three places the number actually lives.
Market and expenses decide the floor
Two costs sink more deals than anything else, and folks chronically lowball both: property taxes and insurance. Both are nailed to location, and both come straight off your cash flow.
Here in Illinois our property taxes run high — 2% to 2.5% of value in a lot of counties, and I just showed you what that did to the Peoria deal. That's the headwind my students work against on our home turf, so I teach them to be ruthless about every other line. I've got folks I've coached who buy down in Indiana and Ohio where the tax bill on a comparable building is a third of what it is here, and that gap alone can swing a deal from 3% to 7%. I'm not telling you to flee Illinois — most of my students don't, they know these blocks cold and that local knowledge is worth real money. I'm telling you to know your expense floor before you fall in love with a building, because a great-looking 4-plex in a high-tax, high-insurance pocket will quietly eat the very return you bought it for.
If you're newer to this whole asset class and the moving parts feel like a lot, I laid out the fundamentals in my guide to multi-family real estate investing — start there, then come back here for the cash-on-cash math.
Deal sourcing sets your purchase price
Here's the thing folks miss when they say they can't make the numbers work: they're looking at MLS listings at retail. Of course the number doesn't work. Every other buyer in the county is staring at that same listing, bidding it up to the price where nobody makes 6-8%. You will not reliably hit those returns on a building anybody can find on Zillow.
The investors I know who are hitting 6-8% right now are buying below retail, and they get there a few honest ways:
- Direct mail to tired landlords. I teach folks to send letters to owners who've held a building 15-plus years and never listed it. Half of them are worn out by 2 a.m. furnace calls and would rather solve that problem than chase top dollar. We don't buy houses, we solve problems — and a seller's problem is your discount.
- Broker relationships. The commercial broker who knows you'll actually close will call you before a building hits the market. But you earn that call with a track record, not a phone call out of the blue. I've got a student who spent his first couple of years calling brokers around here and almost nobody called back — they had no reason to. It wasn't until he'd closed a couple of deals and paid his earnest money like a grown-up that one of them started phoning him first on the off-market stuff. You buy that access with performance, not with charm.
- Distressed and value-add. A 6-unit with two vacant apartments and a leaking roof is priced for what it earns today, not what it'll earn once you fix it. That gap is your return.
Here's one of those worn-out buildings in action. One of my clients picked up a 6-unit in a rougher pocket of Peoria two years back for $215,000 when the comps said $290,000, precisely because three units were empty and the seller had stopped answering his tenants' calls. We worked through it together — filled them, fixed the roof — and that building clears about 9% cash-on-cash on what she put in. Same town, same rates as the deal the mentee walked away from. The only thing that changed was the price she paid going in.
Financing is the other big lever
At today's rates, the loan is your biggest expense, so the structure of it moves your return more than almost anything else.
Seller financing is my favorite. When a seller owns the building free and clear and wants steady income instead of a lump sum, I teach folks to ask them to carry the paper. One investor I coached bought a free-and-clear duplex from a retiring landlord at 5.5% seller-carry when the bank wanted 7.5% — that two-point difference put roughly $150 a month back in his pocket on that deal alone, and it's the difference between a 4% and a 6% building. The seller got monthly checks and dodged a big tax hit; the buyer got a rate the bank would never hand him. That's deciding with the owner against their problem, not haggling against him.
Assumable loans are rare but worth hunting. Some older FHA and VA mortgages can be taken over at their original rate. If a building's carrying a 3.5% FHA loan from a few years back and the seller will let you assume it, you've just inherited a cost of capital that doesn't exist in today's market.
Short-term carry and bridge structures — interest-only stretches, a quick refinance once you've stabilized occupancy — can make a building pencil while you fix it, then settle into permanent financing later. More moving parts, more risk, so I only run those when I've got a clear plan to stabilize.
A word on 1031 money
If you're rolling 1031-exchange proceeds, the clock works against you. You've got 45 days to name your replacement and 180 to close, which is no time to wait for the right deal, and you're often carrying more cash than you'd normally put in one building, which pushes you toward pricier properties where the cash-on-cash is thinner.
If you're stuck there, widen your search radius past your home market, get in front of brokers who specifically serve 1031 buyers, and run the after-tax math honestly. Sometimes accepting a 5% building beats triggering a big capital-gains bill to chase 7% — that's arithmetic, not feelings, and the numbers will tell you which way to go.
What 6-8% honestly requires today
Here's what I see in every investor who's actually hitting these returns right now. They're buying below retail — off-market, distressed, or in a building most folks overlooked. They've got their expense floor under control, especially taxes and insurance, before they sign. They've found below-market financing, usually a seller willing to carry. And often they're adding value, buying a building for what it earns today and improving it toward what it could earn.
None of that is impossible. I just walked you through a client who did it on a 6-unit in a town with some of the highest property taxes in the country. But none of it happens by scrolling listings and running numbers on asking price. The market repriced, and so the work moved upstream — into how you find the deal and how you structure the money.
If you're still back at the bigger question of whether any of this rental business is worth the trouble, I wrote a straight answer to that in is rental property worth it, and I'd read that first before you chase any return number.
The folks finding 6-8% deals are real, and they're not smarter than you. They're just looking in the right places and respecting the math. Run the numbers cold, keep your expenses honest, and remember — no for now is not no forever. The deal that doesn't pencil at asking might pencil beautifully the day that tired owner finally calls you back.
Chris Albin and CRARE Instruction do not guarantee any level of money, success, or lifestyle from learning any of the strategies discussed here. The information in this post is of a general nature and is not intended to replace specific advice you may receive from a licensed professional for legal, financial, or business decisions. Individual results will vary depending on several factors, including your starting point, your effort, and your resources. All information is believed to be true and accurate, and is subject to change without notice.
