1. What is Cash On Cash Return?

Cash On Cash (COC) Return is a real estate investing metric that measures the annual return an investor makes on a property in relation to the amount of mortgage paid during the same year. It's expressed as a percentage and helps investors evaluate the profitability of income-generating properties.

2. How Does the Calculator Work?

The calculator uses the Cash On Cash formula:

Where:

• \( NOI \) — Net Operating Income ($)
• \( Debt\ Service \) — Annual mortgage payments ($)
• \( Down\ Payment \) — Initial cash investment ($)

Explanation: The formula calculates the percentage return on the actual cash invested in a property after accounting for operating expenses and debt service.

3. Importance of Cash On Cash Return

Details: COC return is crucial for real estate investors to evaluate the profitability of rental properties, compare different investment opportunities, and assess whether a property will generate sufficient cash flow to meet investment goals.

4. Using the Calculator

Tips: Enter accurate values for NOI (annual rental income minus operating expenses), annual debt service (mortgage payments), and your initial down payment. All values must be in dollars and greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Cash On Cash return?
A: Generally, 8-12% is considered good, but this varies by market and investor goals. Higher risk investments typically require higher COC returns.

Q2: How does COC differ from ROI?
A: COC focuses on actual cash invested, while ROI may consider total property value. COC is more relevant for leveraged real estate investments.

Q3: Should I include principal payments in debt service?
A: Yes, debt service includes both principal and interest payments on your mortgage.

Q4: Does COC account for property appreciation?
A: No, COC only measures cash flow return, not appreciation. It's a measure of current income, not total return.

Q5: How often should I calculate COC return?
A: It should be calculated annually and monitored regularly, especially when considering refinancing or property improvements.