Buying Investment PropertyCash on Cash Return – A Simple Guide by Eman Hamed April 24, 2018April 17, 2018 by Eman Hamed April 24, 2018April 17, 2018In the world of real estate investing, it is essential for property investors to evaluate the profitability of investment properties before investing their money in them. Doing so will help the real estate investor find the best positive cash flow investment properties and avoid the negative cash flow ones. One of the most commonly used metrics that a real estate investor should always keep in mind to determine the profitability and return on investment (ROI) is the cash on cash return.What’s Cash on Cash Return?The cash on cash return is the rate of return on investment which shows property investors a percentage of the profits they should expect with regards to how much cash they actually invested. This is what differentiates cash on cash return from the cap rate. The cap rate measures profitability regardless of the financing method – all cash or mortgage – while CoC return takes this into account.Related: Cap Rate vs. Cash on Cash ReturnThis will help real estate investors decide the best way to finance their investment properties. For example, say a real estate investor wants to buy an investment property and he/she is wondering which financing method will generate the best return on investment. The CoC return metric will allow him/her to calculate and compare the rate of return on investment for both options which makes it easier to decide the best way to finance the investment property!How to Calculate the Cash on Cash ReturnThe CoC return is calculated by dividing the net operating income (before tax) by the amount of total cash actually invested.CoC Return = NOI/Total Cash InvestmentNet operating income (NOI) is the annual rental income minus the operating expenses, and the total cash investment is all the cash that real estate investors have to pay to make the investment property operational. This includes the amount of money to pay to purchase it, closing costs, rehab costs, and mortgage loan fees (if you take a mortgage from the bank).What’s a Good Cash on Cash Return?Experts in the real estate investing business still disagree on the numbers. Some say anything in the range of 8-12% of CoC return makes a good return on investment. On the other hand, others would not recommend buying the investment property if it doesn’t generate a 20% CoC return.Mashvisor’s Cash on Cash Return Calculator If you are looking for a real estate investing tool to make cash on cash return calculations much easier, we’ve got your back! Mashvisor’s cash on cash return calculator – a part of Mashvisor’s rental property calculator – not only allows you to compute the cash on cash return on an investment property, but it also gives real estate investors access to readily available CoC return data for thousands of investment properties across the US housing market.Sign up for Mashvisor to get a hold of the best rental property calculator in town! For a more in-depth guide on the CoC return, read this: Real Estate Investing 101 – Cash on Cash Return Start Your Investment Property Search! START FREE TRIAL 0FacebookTwitterGoogle +PinterestLinkedin Eman HamedEman is a Content Writer at Mashvisor. With a focus on market reports, she enjoys researching the state of the real estate market in different cities across the US. Eman also writes about trends, forecasts, and tips for beginner investors to gain the confidence and knowledge they need to make wise decisions. Previous Post Should I Invest in Homes for Sale Near Me? Next Post Homes for Sale Near Me: A Good Choice for Real Estate Investing? Related Posts Investing in the Houston Real Estate Market in 2018: Yes or No? Your Real Estate Investment Guide to Airbnb Rental Properties: Where Is Airbnb Legal? How to Compete Against Cash Buyers for Real Estate Buying an Investment Property: Tips That Work Should I Invest in the Los Angeles Housing Market 2018? Top Negotiation Tips When Buying an Investment Property How to Become Rich with Rental Properties How Does the Atlanta Real Estate Market Look Like for Investments at the Beginning of 2018? 5 Steps to Finding the Best Homes for Sale Near Me How to Find a Real Estate Agent Near Me Find Out Which Season Is the Best Time to Invest in Real Estate Should I Buy a Vacation Home as My First Real Estate Investment?