Calculating Cash on Cash Return (CCROI)

5 Replies

Am I calculating ccroi correctly? The monthly number makes sense to me, but the annual ccroi doesn't. The annual column is only multiplied by 12 to create the annual numbers, maybe this is incorrect. Someone rip my numbers apart please!

Your Cash on Cash (CoC) is the ratio of the Cash Flow Before Taxes (CFBT) / Cash outlay {read: the amount of cash invested} ... though I've seen some folks {incorrectly} calculate it as NOI / Cash Outlay ... which would be true if you had no debt or reserves.

As an example, say you bought a $100K property with a 20% down payment, an additional 10K in make-ready renovations and 2% Closing costs, your cash outlay would be: $20K + $10K + $2K = $32K

Now, suppose the property throws-off $200/month in cash-flow each month {NOI - (debt service + reserves) } or $2400/year.

Your CoC would be 7.5%

Cash-on-cash return is calculated as annual cash flow divided by total out of pocket cost. 

For example: If a property cost 20k out of pocket and cash flows 2400 per year then  2400/20000=0.12 or 12%

Are you confident in your rent numbers? I'm in the Midwest and no way I could get $2k for a $140k house. Aside from that, I'm not sure how you can get a rental with only 3% down? House hacking?

CoC: you invest $1000 and get paid $100. That is a 10% ROI

I'm not good at all this numbers stuff, so I just the calculators, but don't forget to include things like taxes, insurance, CapEx, maintenance/repairs, etc.

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