If you’re looking to succeed in real estate investing, you NEED to perform investment property analysis using an investment property calculator. Investment property analysis tells successful real estate investors all they need to know about the return on investment of a property. One of the most vital return on investment measures is the cash on cash return, or CoC for short. The best way, by far, to calculate cash on cash return is to use a cash on cash return calculator.
Cash on Cash Return – The Basics
Essentially, cash on cash return is a form of return on investment that takes into account the profit of an investment and the amount of cash invested in the property. Here’s how to calculate the cash on cash return:
Cash on Cash Return = (Annual Pre-Tax Cash Flow/Total Cash Invested) × 100%
Related: Real Estate Investing 101: How to Calculate Cash on Cash Return
Cash on cash return is a versatile return on investment metric because it can analyze investment properties that are financed either through a mortgage or fully in cash. If an investment property is financed through a mortgage, cash on cash return tends to be higher than when paid for fully in cash.
How much cash on cash return is good for residential real estate investing Generally, anywhere from 8 percent or more. The higher the cash on cash return, the better the return on investment, and thus the better the rental property.
Cash on Cash Return – Advanced
As you can see in the cash on cash return formula, there are two main factors of CoC return. The first is the annual pre-tax cash flow, which is calculated by:
Annual Pre-Tax Cash Flow = Net Operating Income – Debt Service
Annual pre-tax cash flow breaks down into two components, which also consist of factors of their own. When simplifying, annual pre-tax cash flow becomes:
Annual Pre-Tax Cash Flow = (Gross Scheduled Rent – Vacancies – Operating Expenses) – Debt Service
The gross scheduled rent is the amount of rental income a property would receive if it was occupied the entire year. Of course, this isn’t reality for most investments, so the costs of vacancies are included and deducted from the gross scheduled rent. Operating expenses, in their plentiful entirety, are also deducted. The debt service of a property is the amount used to cover the principal and the interest on a mortgage.
We’ve dissected annual pre-tax cash flow. Let’s clarify the total cash invested now.
Total Cash Invested = Down Payment + Closing Costs + Repairs
This variable is much more straight forward than the previous one. Obviously, if a property is paid for fully in cash, the total cash invested will include the sum of the property price, the closing costs, and the repairs.
Why You Need a Cash on Cash Return Calculator
Saves a Lot of Time
As you can see from the cash on cash return formula, there are many factors that go into calculating CoC return. Most of these factors require accurate data to be calculated, and obtaining such data can be tiresome if done manually. Imagine how long it would take to perform an investment property analysis, let alone a real estate market analysis, if you had to search for the data yourself.
The solution to this issue is to use a cash on cash return calculator. Mashvisor’s cash on cash return calculator makes investors succeed in real estate investing by computing CoC return in very little time. All the investor has to do is insert some values, and the cash on cash return of the property is calculated.
There’s no shortage of expenses when it comes to a rental investment property. Some expenses are situational, while others are recurring throughout a specific time frame. Here are just some examples of common expenses: mortgage payments, interest, association fees, repairs, maintenance, and utility bills. Typically, investment properties have a lot more expenses to consider.
How can successful real estate investors keep track of all these expenses? Through the help of a cash on cash return calculator. Mashvisor’s cash on cash return calculator sets up all the expenses of a rental property, some mandatory ones are inserted by the investor, and then it calculates the costs of each.
Related: How to Minimize Your Monthly Expenses in Real Estate Investing?
Calculates Rental Income
Rental income, along with the previously mentioned expenses, accounts for a significant part in the cash on cash return formula. Expenses may be the more difficult factor to calculate, but finding out the estimated rental income of a property is no walk in the park either. The combined impacts of real estate market analysis, comparable properties, and the location’s economy all help determine the rental income. Like calculating expenses, it can be quite difficult and time-consuming for an investor to calculate these values manually. A cash on cash return calculator, on the other hand, accurately collects these data and updates them.
Compares Investment Properties
Cash on cash return, like any other form of return on investment, is used for real estate comps. Calculating the cash on cash returns of multiple properties when searching for an investment property can be downright exhausting. Mashvisor, once again, solves this problem with the cash on cash return calculator.
Related: Mashvisor’s Investment Property Calculator: Real Estate Investing Made Easier
Why You Need Mashvisor’s Cash on Cash Return Calculator
Mashvisor’s cash on cash return calculator, which acts as a part of the broader Mashvisor’s investment property calculator, is the best tool around to calculate CoC return. Cash on cash return is not the only return on investment metric Mashvisor’s investment property calculator calculates. The cap rates and cash flows of Airbnb and traditional investment properties are also calculated and displayed. Essentially, whatever you need from an investment property analysis can be found with Mashvisor.
Mashvisor’s cash on cash return calculator and investment property calculator are among its top tools to help investors succeed in real estate investing. Be sure to start your trial today to earn high returns and find profitable investments!