Cash on Cash Return Calculator

Cash on Cash Return Formula The Cash on Cash Return (CoC) is calculated using the formula:

\[ COCR = \frac{CF}{I} \times 100 \]

Where:

• COCR is the Cash on Cash Return ratio (expressed as a percentage).
• CF is the annual pre-tax cash flow generated by the investment.
• I is the total cash invested.

What is Cash-on-Cash Return?

Cash-on-Cash (CoC) is a metric used to evaluate the return on investment (ROI) for real estate or other investments that generate cash flow. It measures the annual pre-tax cash flow relative to the initial cash investment, providing a percentage that indicates how much return an investor is receiving on their cash invested.

Example Calculation

If you invested $100,000 into a property and it generates an annual pre-tax cash flow of $20,000, your Cash on Cash Return would be:

\[ COCR = \frac{20,000}{100,000} \times 100 = 20\% \]

Importance and Usage

CoC is particularly valuable in real estate because it focuses on actual cash returns, making it a practical metric for assessing investment performance. It is commonly used to compare different investment opportunities.

Common FAQs

1. What is Cash on Cash Return?

   • Cash on Cash Return is a measure of the annual cash earned relative to the total cash invested in an asset.

2. What is a good Cash on Cash Return?

   • Generally, a 20% annual Cash on Cash Return is considered solid, indicating the investment will pay for itself in five years.

3. How does Cash on Cash Return differ from ROI?

   • CoC focuses on cash flow relative to cash invested, while ROI considers total return including appreciation and other factors.