About

The Cash on Cash (CoC) Return measures the operational efficiency of invested capital. While the Cap Rate assesses the property itself, CoC Return assesses the financial structure of the deal. It answers the critical investor question: For every dollar I put into this deal, how many dollars do I get back this year?

This metric is particularly sensitive to leverage. A property with a mediocre Cap Rate can yield a high CoC Return if financed correctly, or negative cash flow if over-leveraged. This tool incorporates detailed debt service calculations (Principal & Interest), operating expense ratios, and vacancy allowances to provide a realistic view of liquidity. It is designed to expose the "silent killers" of ROI, such as underestimated maintenance costs or over-optimistic vacancy assumptions.

Formulas

The Cash on Cash Return is the ratio of annual pre-tax cash flow to total cash invested. Accuracy depends on correctly identifying all outflows.

CoC = NOI − Debt ServiceDown Payment + Closing Costs + Repairs × 100

Where Net Operating Income (NOI) is calculated as:

NOI = Gross Rent × (1 − vacancy) − Operating Expenses

Operating Expenses include taxes, insurance, maintenance, property management, and utilities. Debt Service is the annual sum of monthly mortgage payments P calculated via standard amortization:

P = L i(1+i)ⁿ(1+i)ⁿ − 1

Reference Data

Asset Class	Risk Profile	Target Cap Rate	Target CoC Return	Expense Ratio (Est.)	Notes
Single Family (Turnkey)	Low	4 - 6%	5 - 8%	35 - 40%	Stable, high demand, lower yield.
Single Family (BRRRR)	High (Active)	N/A	∞ or 20%+	40 - 50%	Requires rehab. High equity capture.
Multi-Family (Small)	Medium	5 - 7%	8 - 12%	45 - 50%	Economies of scale, management intensive.
Short-Term Rental (Airbnb)	High	8 - 12%	15 - 25%	60 - 70%	High turnover costs, regulatory risk.
Commercial (Office/Retail)	Med-High	6 - 9%	7 - 11%	NNN (Low)	Longer vacancies, tenant pays expenses (NNN).
Mobile Home Parks	Medium	7 - 10%	12 - 18%	30 - 40%	Land lease model, sticky tenants.
Storage Units	Low-Med	6 - 8%	10 - 14%	25 - 35%	Low maintenance, high automation.
REITs (Paper Assets)	Low	N/A	3 - 6%	N/A	Zero effort, tax inefficient vs. direct ownership.

Frequently Asked Questions

Cap Rate measures the property's natural yield as if bought with 100% cash. It indicates market value and asset quality. Cash on Cash Return measures the yield on your specific equity (down payment) after accounting for the loan. If you use leverage (a mortgage), CoC is usually the more relevant metric for personal wealth growth.

Novice investors often assume 100% occupancy. In reality, turnover, evictions, or repairs cause downtime. A 5% vacancy rate (standard) means you only collect rent for 11.4 months of the year. Ignoring this inflates your projected CoC Return and can lead to buying bad deals.

Yes. The "50% Rule" is a quick heuristic stating that operating expenses (excluding mortgage) will average 50% of gross rent over time. While not exact, it is a safe baseline for initial screening. This tool allows you to manually input expenses or use the rule for a stress test.

A negative CoC Return means the property costs you money to hold every month (negative cash flow). This is common in high-appreciation markets or during the stabilization phase of a "value-add" project. However, for a standard rental, sustained negative CoC is a financial risk.

No. CoC is a "pre-tax" metric. It looks at the cash available in your bank account before income taxes. However, real estate offers depreciation and interest deductions that often make the "after-tax" return significantly higher.