Cash-on-Cash Return (CoC)
How much annual cash your actual invested dollars produce.
Formula
CoC = Annual Pre-Tax Cashflow / Total Cash Invested
Annual cashflow is rent minus ALL expenses (including mortgage). Total cash invested is down payment plus closing costs.
What Is It?
Cash-on-cash return measures the annual yield on the actual dollars you put into a deal. Unlike cap rate, it accounts for financing — so it reflects your real return as a leveraged investor.
Worked Example
Buy a $500K property with 20% down. Monthly cashflow is $200.
| Down Payment | $100,000 |
| Closing Costs (2.5%) | $12,500 |
| Total Cash Invested | $112,500 |
| Annual Cashflow | $2,400 |
Why It Matters
- ✓Most relevant metric for leveraged investors (which is most of us)
- ✓Directly comparable to stock market returns, CD rates, or other investments
- ✓Factors in the actual cost of your mortgage
- ✓Helps answer: "Is this deal worth tying up my capital?"
What's Good vs Bad?
Excellent
12%+ (strong cashflow deal)
Good
8–12%
Poor
Below 4%
Limitations
- ⚠Ignores appreciation, principal paydown, and tax benefits
- ⚠Changes over time as rents increase and mortgage stays fixed
- ⚠Sensitive to down payment % — lower down = higher CoC (but also more risk)
- ⚠Year 1 only — doesn't capture multi-year compounding
How Prop2Profit Uses This Metric
CoC contributes 20 of 100 points to the investment score. Prop2Profit computes it as annual full cashflow divided by the down payment (default 20%). Closing costs are not included in our denominator, so our CoC runs slightly optimistic versus the strict textbook definition — add ~2.5% of purchase price to your cash basis for the stricter number. Adjust assumptions in the inline analysis panel.