Cash Flow Calculation Question- Cash on Cash Return

[Nikita Sharma]

Hi everyone,
I just started looking into my first property to invest in (SFR or MFR). I am setting up the cash flow and appreciation expected for the first 5 years after purchase. I had a question about annual property tax and insurance over the first year.

These usually sit in the 'expenses' section of my Proforma, however during the first year, I understand that property tax and insurance are included in the closing costs after purchase. To make sure I'm not double counting these costs, do I remove them from expenses?

I am asking as whatever decision I make will impact my calculation of cash on cash return over the first year.
1) Option 1- Since tax and insurance are included in the closing costs, I remove them from expenses, which will effectively increase my cash flow calculation for the first year.
2) Option 2- I leave them in expenses, but subtract them from closing costs. For example if taxes and insurance summed up to be $2K, and total closing costs were $3K, I would subtract this and be left with $1K closing costs ( the $2K taxes and insurance would be reflected in expenses). This would impact the denominator of the cash on cash calculation, as total money put into the investment would be reduced by $2K. 

What do you typically do? (for additional info, the properties I am looking at are in Ohio)

Additional questions-
What do you typically use to estimate tax and insurance for a potential long term rental property? Any reliable websites or tools?
If you have any guides or examples on how to set up a cash flow analysis, that would be super helpful. I am currently following an example from a book.
Thank you so much!