Cash on Cash Return

6 Replies

Hello,

Just looking for an explanation of this term: Cash on Cash return. I know it refers to % of return a rehabber expects but I just need further clarification.

Thank you so much.


Originally posted by @Cal C. :
Divide how much cash you profited by how much cash you put in.

Yup. Only thing I'll add is that this is typically an annualized number. So, you divide how much cash you profited IN ONE YEAR by how much cash you put in.

Promotion
Guaranteed Rate
Guaranteed Rate is a top mortgage lender
Save $1,290 on your next home – no lender fee*
Get special perks like $1,290 in lender fee savings when you buy a second home with Guaranteed Rate.
Apply Now

For example, if you have a rental that you put $20,000 of your own money into (regardless of the purchase price) and you make a profit after PITI and other expenses of $5,000 in a given year then your CoC return for that year is 25% ($5,000/$20,000)

If you rehab a property and it takes you 6 months from start to finish. Let's say you put in $20,000 and make a profit of $5,000 then you repeat this again during the next 6 months, your annualized CoC return is 50% ($10,000/$20,000)

Originally posted by @Jane Bigcas :
Thanks J, Cal and Dusty!!!

As REI's what is your cash-on-cash % expectation?

For more passive investments, like rentals, I target minimum 15%.

For more active investments, like flips, I target minimum 30%.