Real Estate Agent · Phoenix, AZ · Member since 2019 · 80 posts · 30 votes
Hi Guys! I do flips in Los Angeles and Phoenix and I'm trying to use the BRRRR Calculator to analyze some deals. Does anyone know the variables that effect the Cash on Cash NOI calculation the most? Like increasing rents, decreasing monthly costs, etc...
Rental Property Investor · Prairie Village, KS · Member since 2015 · 2k+ posts · 2k+ votes
6y
Cash on cash - you just have to understand what the numerator and the denominator are. The numerator (the top number) is the net amount of money your property brings in a year. So if you gross 50k and your expenses are 25k your NOI or your top number is 25k. Your denominator(the bottom number) is how much cash you outlay. So if you are in a property all cash it's very different than having 80 LTV. BRRRR often produces very high cash on cash returns because the amount of money in the deal at the end if low. So big numerator, small denominator, high cash on cash. So the big drivers of cash on cash is actually how much cash you have in the deal. Cash on cash (as the name implies) is how much money (NOI) your property produces for the cash you have invested. So less money in the deal or more money being produced are the big drivers here. Does that help?
Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes
6y
They would affect it the exact same amount if they are calculated in real dollars, "a penny saved is a penny earned" If you increase rent $1 or decrease expenses $1 you still add one dollar to the bottom line.
Rental Property Investor · Prairie Village, KS · Member since 2015 · 2k+ posts · 2k+ votes
6y
Cash on cash - you just have to understand what the numerator and the denominator are. The numerator (the top number) is the net amount of money your property brings in a year. So if you gross 50k and your expenses are 25k your NOI or your top number is 25k. Your denominator(the bottom number) is how much cash you outlay. So if you are in a property all cash it's very different than having 80 LTV. BRRRR often produces very high cash on cash returns because the amount of money in the deal at the end if low. So big numerator, small denominator, high cash on cash. So the big drivers of cash on cash is actually how much cash you have in the deal. Cash on cash (as the name implies) is how much money (NOI) your property produces for the cash you have invested. So less money in the deal or more money being produced are the big drivers here. Does that help?
They would affect it the exact same amount if they are calculated in real dollars, "a penny saved is a penny earned" If you increase rent $1 or decrease expenses $1 you still add one dollar to the bottom line.
Cash on cash - you just have to understand what the numerator and the denominator are. The numerator (the top number) is the net amount of money your property brings in a year. So if you gross 50k and your expenses are 25k your NOI or your top number is 25k. Your denominator(the bottom number) is how much cash you outlay. So if you are in a property all cash it's very different than having 80 LTV. BRRRR often produces very high cash on cash returns because the amount of money in the deal at the end if low. So big numerator, small denominator, high cash on cash. So the big drivers of cash on cash is actually how much cash you have in the deal. Cash on cash (as the name implies) is how much money (NOI) your property produces for the cash you have invested. So less money in the deal or more money being produced are the big drivers here. Does that help?
Hey Lee, definitely super helpful! I really appreciate it. Clears it up for me now.
Here is a simple example. Bought an investment for $125,000 and put $25,000 down and have a 100,000 mortgage. Rent is $1500 a month. Property taxes, ins, pm, maintenance are $500. Mortgage is $537 (5% at 30 years). Total expenses are 1037, cash flow is $463. Annually 463 x 12 = $5556/$25,000 = 22% CoC/ROI.
Here is a simple example. Bought an investment for $125,000 and put $25,000 down and have a 100,000 mortgage. Rent is $1500 a month. Property taxes, ins, pm, maintenance are $500. Mortgage is $537 (5% at 30 years). Total expenses are 1037, cash flow is $463. Annually 463 x 12 = $5556/$25,000 = 22% CoC/ROI.
Good Luck.
Hey Kenneth thanks so much. That breakdown makes it super simple. Appreciate it!