💵 If you’re financing your rental property with a mortgage, Cash-on-Cash Return (CoC) is one of the best ways to measure how well your investment is actually performing.
Unlike ROI, which focuses on total investment, CoC return shows what you’re earning from your actual cash out of pocket — after mortgage payments.
Table of Contents
🙋 What is Cash-on-Cash Return?
Cash-on-Cash Return tells you:
How much profit you’re earning each year, based on how much cash you invested.
🧮 Cash-on-Cash Return Formula
Here’s the simple formula:
CoC Return = (Annual Cash Flow / Total Cash Invested) × 100
Where:
- Annual Cash Flow = Net Income – Mortgage Payments
- Total Cash Invested = Down Payment + Closing Costs + Repairs
🏡 Example
Let’s say:
- Annual rental income: $18,000
- Operating expenses (taxes, insurance, maintenance): $6,000
- Annual mortgage payments: $7,200
- Total cash invested: $50,000
📌 Net Income = $18,000 – $6,000 = $12,000
📌 Annual Cash Flow = $12,000 – $7,200 = $4,800
📌 CoC Return = ($4,800 / $50,000) × 100 = 9.6%
So you’re earning 9.6% annually on the actual cash you put in!
🏁 Final Thoughts
Cash-on-Cash Return gives you a realistic picture of how well your cash is working, especially if you’ve used financing to buy your rental property.
✅ Use it when:
- You're comparing rental deals that involve a mortgage
- You want to track true cash earnings
- You're focused on maximizing return for your invested dollars