When making all cash offers.. Analysis

2 Replies

I had a quick question that I hope one of the veterans (or anyone with the knowledge) could elucidate for me.

When making an all cash offer, how do you analyze Total ROI and CoC ROI? Or is there another metric you use? If I put down 20% on a place, lets say it's CoC ROI is 10% self-manage and 5% with property management (10% rental income). How about if the offer is all cash.

You're over complicating it.  It's as simple formula:

All cash out (within the 1st year only = CoC Return
All cash in   

Example:  House cost $100k;  Cash flow = $500/month = $6k/year

A - You buy all cash
Cash in = $100k
Cash out = $6k
CCR = 6% (not very good)

B - You buy with 20% down
Cash in = $20k
Cash out = $6k
CCR = 30% (much better)

...or, my favorite way to do this,...

C - You buy with 100% down, then refinance it all back out
Cash in = $100k
Cash out = $106k
CCR = 106% (much, much better)...then use those funds all over again.

CCR is the best formula to access financial risk since it measure how large it is (the high the %, the greater the financial risk) quickly it is reduced.

Joe V      

Hey @Andrey Y.  , 

So cash on cash is calculated by dividing your cash flow before tax by your cash invested. So if your purchasing a place all cash then you would do something like this, 

Gross rental income - Operating expenses = Net Operating income (normally you would subtract debt service too but you wouldn't have it in this situation)

You would then divide that left over number by the cash you invested. 

Now with numbers, assuming a 100,000 purchase price all in cash

30,000/annually rental income - 15,000 misc exp= 15,000 in operating income. 

15,000/100,000 = 15% COC.

I'm sure others can improve upon what I did here but the best and easiest thing to do is to search the resources area and download one of the free deal analysis spreadsheets. I have one I've customized too if you need it. It makes it so easy even someone who is terrible in math like myself can figure it out....

Goodluck! 

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