Using a percentage to express the cash income received for the cash invested in a property, cash-on-cash (COC) return is one of several metrics that can be used to assess a property’s viability. Moreover, it is most commonly used to do so for properties that receive cash flow on a monthly, quarterly, or annual basis.
At the most basic level, COC return is equal to the income received divided by the total amount invested. For example, if someone invests $1,000 in a property and receives $300 in income, the COC return on that property is 30 percent. When calculating COC return, it is important to omit other types of returns, such as tax benefits and asset appreciation.
Of course, an accurate COC return value relies on the correct calculation of income from a property. To calculate income, investors typically start with the net operating income (NOI) from the property and subtract other expenses such as debt service and capital reserves.
