Good cash on cash returns generally start with what your alternate investment options are. You can buy nearly risk and management free corporate lease deals today for 8% cash on cash; some with favorable financing at 9% cash on cash.
What's a "new office building in Boston" mean? big, small, risky, leased to a single tenant? To be competitive in the urban downtown market, I bet you need to be in the 8%-9% range. to be a smart investor and get a "good" return - I think you should be seeking 9%+ cash on cash. If you get 50% financing @ 8%; you're looking at a 9%+ cap rate.
For higher turn-over, management intense or older building with high maintenance (basically a B-Building); that's probably the right going-in cash on cash today.
Oct 6, 2009