cash on cash return on investment
Novice real estate investor here. Can someone help me understand coc roi. I understand it's cash on cash return on investment. When I'm analyzing deals, it's coming up as 0.02% or even negative percent if i'm overly conservative with the expenses. From what I read a good coc roi is 7-10%. I don't know if I'm interpreting the coc roi correctly. Thanks for your help.
Most Popular Reply
I would love to help!
When analyzing a deal, look at the total cash coming out of pocket and divide that by the estimated ARV.
For example, the property costs $200,000 and needs $60,000 in work with an exit of $340,000. You buy this property in cash, so you do not have any holding/lender fees. So you are all in on this property for $260,000 and you sell for exactly $340,000 with 6% resale costs at $20,400. Your new cash out-of-pocket is $280,400. You would divide $280,400/$340,000, leaving you with an ROI of 82%.
I hope this helps!