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Cash on Cash (CoC) return

Cash on Cash (CoC) return

What is CoC Return?

CoC stands for Cash of Cash Return. It's a measure of the value of your investment in terms of dollars received for each dollar invested. The CoC Return considers all your operating expenses, including debts and mortgages.

How do I calculate CoC Return?

\[ {{Annual \, net \, cash \, flow} \over Equity \, invested } = CoC \, Return \, ( \% ) \]


Examples

All Cash, no repairs

Imagine I buy a property for $100,000. My property rents for $1,000 a month. Operating costs are $300 a month.

  • Annual Net Cash Flow is $8,400 = (1000-300)*12
  • Cash on cash return is 8.4% = 8400 / 100000

All Cash, with Repairs paid out of pocket

Imagine I buy a property for $100,000. My property rents for $1,000 a month. Operating costs are $300 a month. Property also needs $20,000 worth of repairs.

  • Annual Net Cash Flow is $8,400 = (1000-300)*12
  • Cash on Cash return is 7% = 8400 / 120000

20% Down, no repairs

Imagine I buy a property for $100,000. My property rents for $1,000 a month. Operating costs are $300 a month. I'm putting 20% down and getting a mortgage and my mortgage payments are ~$500 a month.

  • Annual Net Cash Flow is $2,400 = (1000-300-500)*12
  • Cash on Cash return is 12% = 3600 / 20000

20% Down, with Repairs paid out of pocket

Imagine I buy a property for $100,000. My property rents for $1,000 a month. Operating costs are $300 a month. Property also needs $20,000 worth of repairs. I'm putting 20% down and getting a mortgage and my mortgage payments are ~$500 a month.

  • Annual Net Cash Flow is $2,400 = (1000-300-500)*12
  • Cash on Cash return is 6% = 2400 / 40000

Cash on Cash Return considerations

CoC return is generally a good metric to think about when considering which property to invest in but make sure you consider:

  • Your cash on cash return can vary drastically, for the same property, if your assumptions around debt changes.
  • Cash on cash does not factor in equity. It's just the high level total expected cash earned, pre divvying and distributing to other equity holders.

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