Cash on Cash Return (COC) is a key performance indicator in real estate investment, providing investors with insights into the profitability of a property. This metric calculates the annual return an investor can expect to receive on their actual cash investment in a property, expressed as a percentage. The formula involves dividing the property’s pre-tax cash flow by the total cash invested.

Cash on Cash Return is particularly valuable for investors seeking to assess the efficiency of their capital deployment and make informed decisions about potential investments. A higher CoC indicates a more favorable return relative to the amount of cash invested, reflecting greater profitability. Conversely, a lower CoC may suggest that the property’s performance is not maximizing the investor’s cash investment.

This metric proves essential for comparing different investment opportunities and aligning investment strategies with financial goals. It accounts for both the property’s income generation and the investor’s out-of-pocket expenses, providing a clear picture of the return on the actual cash invested. In summary, Cash on Cash Return serves as a practical tool for real estate investors, guiding them in evaluating and optimizing the financial performance of their investment portfolios.