Calculating CoC return

[Inbar S.]

Hey everyone!

I am in search of my first investment property. When calculating my monthly/annual return, my realtor only takes into consideration the interest of the mortgage payments, whereas I have been calculating it using the full P+I. For example, one of the properties we saw had a 6% return in the first year and almost 11% in the second year per his calculations, but when I take into account the principle payments as well, I barely make it out with $20 in monthly cash flow… and therefore a very small return. I am very new at this- am I missing something?? Appreciate all the help!