Cash On Cash Return...Or, should I use another metric?

[Everett Stephens]

Greetings -- Thanks much in advance for your consideration. Measuring Cash On Cash returns is a go-to benchmark for me. However, it doesn't seem to make sense in the case of a cash-out refi when there's sufficient equity to take your initial actual cash investment completely out. For example: What investment ROI metric should I use when:

1. We acquire a rental property for $80,000. 2. We invest $25,000 for rehab.  3. The rehabbed property appraises for $160,000. 4. The bank is willing to finance 80% of the appraised value up to $128,000. 5. We refi for $105,000 essentially zeroing out our cash investment.  In this example, our Cash Investment is ultimately zeroed out. As such, how do you measure a Cash On Cash Return when the Initial Investment is, more or less, zero, but still results in a positive annual cash flow of around $5,000.00? Thanks much for helping me think through this...I feel like Captain Obvious is about to deliver me some tuition.  :) I'm OK with that....

[Michael Haas]

One great metric to add to the mix is GRM (Gross Rent Multiplier). Since it looks simply at the purchase price / value & gross yearly rents its easy to compare apples to apples and evaluate the quality of one investment compared to another, without different loan options and different cash outlays skewing the numbers too much.

PS: I'll second what others have said - when executed right, BRRRR is amazing :)