Cash-on-Cash Return - include rehab cost or not

[Gary Michalske]

I just noticed a disagreement between @J Scott SFH_Rental_Analysis and @Brandon Turner Four Square method for calculating the cash-on-cash return. It may just be me overlooking something but J Scott doesn’t include the cost of the rehab in the calculation where Brandon does. Unless the rehab cost will be included in the loan I feel it should be included in the calculation. I really want to understand how this is supposed to be calculated so I do it properly when analyzing properties. Anyone have any insight?

[Pete Perez]

Cash on cash is a percentage. Cash output over cash input. How much money you make annually, divided by the total cash you put into the deal. It is like the first law of thermodynamics except you can have a percentage greater than 100% with real estate.