What is Cash-on-Cash Return?
Cash on cash return (CoC return) is a measure of the annual return on investment for a rental property based on the cash invested in the property. It is calculated by dividing the annual net cash flow of the property by the total cash invested in the property. The net cash flow is the difference between the annual rental income and the annual operating expenses of the property, such as mortgage payments, property taxes, insurance, and maintenance costs.
The CoC return is expressed as a percentage and reflects the expected return on the cash invested in the property. A higher CoC return indicates a higher expected return on investment, while a lower CoC return indicates a lower expected return.
The CoC return is often used by real estate investors to evaluate the potential profitability of a rental property, as well as to compare the expected returns of different properties. It is important to note that the CoC return is a rough estimate of the return on investment and may not accurately reflect the true profitability of a property in all cases. Factors such as the location, condition, and quality of the property, as well as the current market conditions, can all affect the CoC return.
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