CoCROI based on free or total cashflow?

5 Replies

When people (or you!) calculate the Cash on Cash Return On Investment (CoCROI) to  compare the profitability of a real estate investment and compare that to other investment options, should it be based on the free cashflow (income - expenses, not including mortgage payments) or the total cashflow (income - expenses, including mortgage payments)?

I thought that when referring to CoCROI one was not supposed to include the mortgage payment but I've seen people such as Brandon do it when comparing an investment to the stock market in one of his YouTube videos.


CoCR includes the mortgage payment.

You're confusing CoCR with the CAP rate which does NOT include the mortgage payment...and is only used for commercial properties.

Keep in mind that both CoCR and CAP Rate are only applied the first year of the corresponding investments.

I think this really depends on what you are trying to figure out. If you want to know how much cash on cash you will get at the end of the year. I think it is very important to add the mortgage in the numbers. Because that will give you a true evaluation of how much the home will cost you. But if you are buying the property with all cash then you don't need a mortgage number in it. Hopefully, that helps.  

Cash on cash is how much you are going to put in your pocket after you have paid everything. But it's not a good caparison for other types of investments because it doesn't take into account appreciation, forced equity and principal pay down.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here