Cash on Cash Return

From: Greg Mowat

Has anybody set up a calculator/spreadsheet to calculate the Cash on Cash return on a property.

I've started to do this for my properties but I don't want to miss anything.

I want to use this to give me a true picture of my properties performance for what I have personally put into it rather than the Banks and also b4 tax advantages and after costs

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Reply: 1
From: Mike .

Hi Greg,

You didn't mention whether your properties were wraps. For a normal property purchase ROI - Return on Investment compares your net yearly profit (diff between repayments and rent) with your initial net investment (deposit minus costs). The variable is the net yearly profit which increases as rents increase or decreases as interest rates increase. The Cash on Cash return is the same as ROI for a normal property purchase.

However, for a wrap, the buyer's deposit/FHOG alters both ROI and COCR. For ROI your initial net investment is reduced by receiving the buyer's deposit in the first year. This has the effect of giving you a larger ROI than a normal property purchase would. Hence, the attraction of wrapping properties.

Cash on Cash return applies to the first year only and is calculated differently to ROI by how the wrap buyer's deposit is treated. This time the wrap buyer's deposit is added to your first year net cash flow. Your total income in year one is divided by your initial net investment.

Since I don't know what type of purchase you're doing, I've attached two simple spreadsheets - ROI for standard purchases & ROI & COCR for wraps.

Regards, Mike
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Reply: 1.1
From: Tibor Bode

Thanks Mike, I also took a copy of them.

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