Cash on Cash Return Calculator
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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
-
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.
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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.
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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.