Free Cash On Cash Return Calculator for Real Estate ROI

The Cash-on-Cash (CoC) return calculator compares the cash generated by a property to the cash invested, is commonly used by seasoned real estate investors. In other words, cash on cash return calculation measure how much money you get to keep for every penny you invest in your property. In our opinion, it is useful to project this figure when you're thinking about making a purchase as well as a metric to monitor over time once you've bought a property. Cash on cash return is one of the most important rental property calculators for assessing the health of your investments because your cash is valuable.

What is cash on cash return?

Cash on cash return is calculated by dividing the annual pre-tax cash flow from the investment by the total cash invested. It is a good measure of the short-term profitability of an investment. Cash on cash return is a financial metric that is used to measure the profitability of a real estate investment. It is calculated by dividing the annual pre-tax cash flow from the investment by the total cash invested in the property, and expressing the result as a percentage.

Free Cash on Cash Return Calculator

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You can use our free gross rental yield calculator to find out more on how to calculator your real estate investments ROI.

What is the formula for cash on cash return?

The formula for Cash on Cash Return is as follows:

Annual Pre-Tax Cash Flow / Total Cash Invested = Cash on Cash Return

It is crucial to remember that your annual cash flow is what remains after debt service has been paid. The purchasing price of the property plus closing fees and any capital expenditures, less the balance of the outstanding mortgage, equals the total cash invested.

What I need to calculate CoC returns?

You must first determine the property's annual cash flow before you can determine CoC. This is obtained by deducting the annual debt service cost from net operating income. Utilize our Net Operating Income Calculator to quickly determine NOI.

Calculate the Total Cash Invested in the Property as well. The amount invested overall, including the down payment, closing costs, upfront repairs or enhancements, and financing fees, is referred to as Total Cash Invested.

How to calculator cash on cash returns?

The cash of cash return of a property is divided by the Total Cash Invested to determine CoC Return. 

You must first take all of your generated income (inflows) and subtract all of your expenses to arrive at your net cash flow (outflows). Alternatively, you can calculate your annual cash flow using the cash on cash return calculator above by entering your net operational income and monthly debt service. 

The total cash invested is then calculated by adding the purchase price plus closing fees, the remaining mortgage balance, and any property-related capital expenses. By dividing annual cash flow by total capital invested, you may get your cash-on-cash return.

Examples of cash on cash returns?

Down below are a couple of examples on how to calculate cash on cash returns on your real estate investors. The first example is of when you are purchasing a second hand property for investments. The second examples is when you are purchasing a new condo for sale as your main property type for your real estate investments.

• You purchase a rental property for $200,000, with closing costs of $10,000.
• The annual rent on the property is $24,000, and the annual operating expenses (such as property management fees, repairs, and maintenance) are $8,000.
• The annual pre-tax cash flow from the property is therefore $24,000 - $8,000 = $16,000.
• The total cash invested in the property is $200,000 + $10,000 = $210,000.
• The cash on cash return is therefore ($16,000 / $210,000) x 100 = 7.6%.

The second example is down below and it is pretty simple and easy metrics to fully understand the small details for your profits and investments portfolio.

• You purchase a vacation home for $500,000, with closing costs of $15,000.
• You take out a mortgage for $400,000, with monthly payments of $2,500.
• The annual rent on the property is $30,000, and the annual operating expenses are $10,000.
• The annual pre-tax cash flow from the property is therefore $30,000 - $10,000 - (12 * $2,500) = $5,000.
• The total cash invested in the property is $500,000 + $15,000 - $400,000 = $115,000.
• The cash on cash return is therefore ($5,000 / $115,000) x 100 = 4.3%.

In conclusion cash on cash return is a useful metric for real estate investors because it helps them understand the profitability of their investments on a cash basis. It is especially useful for comparing different investment opportunities, as it takes into account the amount of cash invested in the property and ignores factors such as debt and tax implications. On the other hand of a overview of real estate investments calculation is to know the rental yields of your property. Here is a guide for rental yield formula and free calculator you can use to find an overview for your real estate investments journey.