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 |
$2,400 / $112,500 = 0.02132.13% CoC Return
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 uses default 20% down + 2.5% closing costs. Adjust assumptions in the inline analysis panel.