Because it tells you how much you're making with the money you've invested. It's important because you need to know how one investment compares to another in order to pick the best one. If you can put $100 cash in the stock market and make 6%, or you can put $100 cash in the real estate market (usually in the form of a down payment on a loan) and make 7% then obviously the real estate market gives you a better cash-on-cash return for your $100.

@David Jones - CoC is your ratio of annual net cashflow to your amount invested. It's significant for several reasons. People will throw around a lot of terms like " monthly net cashflow of $300/M, is this a good deal?" CoC helps make more sense of this as if you have $1,000 invested in the deal to earn this return, you are sitting much prettier than if you have $50k invested to make the same $3,600/year

I personally love the CoC metric as it's highly correlated to my velocity of acquisitions. If I'm leaving a lot of money tied-up in deals (lower CoC) it is harder for me to expand. Yes I do believe CF is king but being able to BRRRR the majority of my funds out of each deal after the rehab/refi is what allows me to continually recycle my initial investment and expand without running out of capital.

Lastly, this metric also allows you to evaluate different financing options and guide your decision on the best refi option for each individual deal.  

I've only scratched the surface here, but feel free to ping me if you want to chat on this.   

@Jason Hendrickson

@Tom Shallcross

Thank you for taking time to explain. I have a better understanding.