Cash on Cash Calculation Question

[Julie Hassett]

Hi! Math question here...

As my property cash flows and I build up a reserve of money, does the "money invested" part of the CoC equation change? Or does it always stay constant?

Scenario: I buy a property for cash... $95,000 all in. It rents for $1250 per month. After a few years, I have $25,000 in my bank account that I can either leave there or redeploy elsewhere. 

So, is my CoC return always based on the original $95,000? Or at this point, do I technically only have $70,000 cash invested?

Is the "initial investment" static or rolling? Especially if, at some point, you use your cash flow to buy another property.

I could NOT find this answer anywhere online, so thought someone here might have some insight. Thanks!

[Ned Carey]

@Julie Hassett Cash on cash really only makes sense the first year of operation.
After the first year the time value of money comes into play. So IRR or return on equity are better measures.

There  are many ways to evaluate fears and the performance of that deal after purchase.Personally I believe the best way to evaluate is by IRR after you have sold the property. 

Of course that doesn’t help much during the holding period.