Sometimes, to understand a situation better, you need to look at the bigger picture. Other times you must look at its most basic and fundamental aspects, like if it’s a good idea for you or not. So before you dive into the details, would it not be better if you decide if the real estate investment property is good for you, or not? When you are in need of a general picture, cash on cash return will provide you with it. It is a value that simply tells you if your intended real estate property is a profitable investment or not. When you look at investment properties, cash on cash return gives you a quantity you can use to determine just that. This value may also help by pointing out if your intended property is up to your set standards or not.
However, when we talk about investment properties, we are talking purely of financial traits in particular. However, it does not take into account the way you provided money to invest in it. Even if you acquired it by means of a loan or mortgage, this does not count as invested money and is, therefore, superfluous information.
What Is Cash on Cash Return?
It is a metric that tells you if buying an investment property will be beneficial to you or not. It is an aspect of property valuation. Whether it is good or isn’t depends on your requirements. To elucidate, cash on cash return calculates what your profit will be based on what you spend annually. You can then decide if that profit is well suited for your needs and wants. The value takes into account the money you invest in the rental property. Moreover, it takes into consideration the total income of your investment property. According to Investopedia, cash on cash return may also help by “providing business owners and investors with an analysis of the business plan for a property and the potential cash distributions over the life of the investment.”
Related: Property Valuation Methods: Real Estate Investing
How Is It Calculated?
You can calculate your cash on cash return by dividing your net operating income (NOI) by the cash invested in the rental property.
Make sure you add all factors contributing to the mentioned values. Things like rehab costs and loan fees must be taken into account.
Most real estate investors aspire for a cash on cash return ranging from eight to twelve percent, whereas others do not accept anything below twenty-five. This goes back to what you need or want. Generally, however, a CoC return of 8% or more is considered good.
Related: What Is a Good Cash on Cash Return?
What Tools Can Help Me?
To calculate cash on cash return, real estate investors use a tool known as the Property Investment Calculator. It is an online real estate investment tool used to qualify metrics that appeal to the property’s valuation. Its features enable you to calculate many measures ranging from cap rates to cash on cash return. It also gives you access to investment property analysis and real estate market analysis. Both features are serviceable when reaching the in-depth analysis state.
When using this tool to calculate the cash on cash return on your desired rental property, you can in the process set requirements as to what you want. Mashvisor provides you with access to this tool, in addition to an analysis based on that info.
Mashvisor also provides you with the Property Finder feature. This tool will help you by excluding research results that do not fit your predetermined criteria. No more wasting time on research that isn’t concerned with what you want. The property finder will isolate your desired rental properties for you.
What Should I Bear in Mind?
When calculating your cash on cash return, you must bear in mind several things. Firstly, that it will only provide you with an insight that aids you in deciding if buying the rental property is a good idea or not. Meaning that it will not factor in the means you must take to buy and/or provide for it. The results of this metric alone are not enough, nor encompassing. Thus, you may have to perform more research and find more analysis before you make your decision.
Secondly, some properties of an investment may become part of the cash on cash return formula. For example, location sometimes determines the land’s value, as well as building costs. So be sure to include all the information that is needed when attempting to find the cash on cash return rate.
Related: Cash on Cash Return: Real Estate Investing
If you are interested in saving time and effort on research, it is a good idea to begin at Mashvisor. Mashvisor provides you with results you can customize to fit your wants. The tools are available to you, in addition to the analysis you might need. It provides you with multiple services ranging from calculating cash on cash return, to locating your ideal rental investment. You can arrange these values to personalize the results. It gives you a good chance to make money in the real estate market.
How Do I Find a Rental Property with a Good Cash on Cash Return?
When starting your research at Mashvisor, all you need to do is type in the location you are interested in within the search tab. You will soon discover a list from which you can choose a real estate investment. Helpfully, other values can be displayed as well. Searching for the properties with the highest cash on cash return is now made easy. Using these features, you can narrow down your options until you find your fitting rental property.
Finding an Investment Using Cash on Cash Return
On a related topic, you can also use the Property Finder tool. This tool is designed specifically for you to help narrow down your research. It provides you with results that fit your criteria and preference only. So instead of wasting time comparing and analyzing investments from different searches, the Property Finder tool will do it for you and provide you with a list of properties with the highest cash on cash return in the location of your choice.
You can use the Property Investment Calculator as well as the Property Finder.
So what are you waiting for? An optimal real estate investment is just a research away! Complete with all your chosen features, a high cash on cash return? No problem! Maybe an excellent location? Sure why not! You are just a few steps away from becoming a real estate investor. Mashvisor is here to save you time and effort, and give you excellent results. With all your chosen tools and descriptions, all at one place. Mashvisor is waiting to help you find your ideal rental property!