Cash on Cash Return Calculator

Simplicity is one reason why investors use cash-on-cash return calculators. You get a simple metric that you can use to compare or evaluate properties. Even though working out your income this way has its limitations, you get enough information to make an informed decision on your investment property.

Before using the cash return calculator, you will need to calculate the expected first year of annual income—this includes rental income, parking, and other due payments.

Then, you will need to gather some data about the cost of your investment. You will need the following information for RentDrop’s cash return calculator:

– Interest
– Down payment
– Closing costs
– Repair costs
– Bank loan costs
– Seller concessions- Utilities and other additional costs during vacancy (e.g., property taxes and insurance)

After you enter all the values into the calculator, including the projected annual pre-tax income, you will get a percentage. The higher the percentage—the better investment and higher annual profit you can expect. In most cases, a solid investment could be any property with a CoC return between 8% and 12%. Anything above 12% will usually make you a lot of money.

Here’s an example of how the cash-on-cash return calculator works.

Let’s say you invest $80,000 in the property. This includes mortgage payments, utilities, repairs, and down payment. Say that annual income from the property is $7,500. Using the cash-on-cash formula, you end up with a decimal figure of 0.094 ($7,500 ÷ $80,000). Multiply the result by 100, and you see that the cash-on-cash return is 9.4%.

While the cash-on-cash return calculator is a valuable tool, it has some limitations. For example, it can be tricky to get an accurate figure if a rental property requires extensive repairs that may take many months. Also, down payments, closing costs, and paying contractors could happen at different times.

Some other variables that can affect the cash-on-cash return include:

– Your individual tax situation
– Property appreciation or depreciation
– Levels of risk associated with the rental property
– Interest

Cash-on-Cash Return (CoC) vs. Return on Investment (ROI)

The difference between cash-on-cash return and ROI is that CoC return only looks at the profits relative to the investment cost. Return on Investment calculations take into account loans, appreciation, tax benefits, and many more variables.

CASH FLOW & INITIAL LOAN AMOUNT