A preferred return is where profits are distributed to our investment partners before we collect any profit. A pref is stated as a percentage, such as 8%.
Example: If you were to invest 100k on deal offering an 8% pref you would have to collect 8k per year before we collect an of the profits
Cash-on-cash return measures the amount of cash flow relative to the amount of cash invested. Cash-on-cash return is calculated over over the hold time of a property and aveagerad out on a yearly basis.
Example: If a property cash flows 6% year one, 7% year two and 10% year 3-5, the averaged cash on cash return is 8.6%.
Value add is our go to for investment properties. Value add can be a complete reposition (taking a C class asset to a B class asset), small renovation to achieve higher rents, new management to increase rents and lower expenses. All in all value add is a strategy to increase the NOI of a property.