Calculating Cash on Cash Return

[Matt Browning]

I'm using the Rental Property tool on BP, but I have a question on CoC return. I have around $15k in cash, and $305k available in my HELOC. When using the tool I put the HELOC funds in the downpayment, so the report assumes that the downpayment I'm making is cash. So when I see final cash flow, I have to subtract the debt service payment going to the HELOC. That's fine, but my deal only has around a 9% CoC return even before I'm paying for my HELOC debt service.

I guess my question when evaluating this deal, I'm probably only going to put $10k in cash in the deal and the rest will come from my HELOC. I'm assuming that I should still use the 9% as my CoC... but since I'm technically borrowing the HELOC funds my actual CoC would be exponentially higher since I only have $10k in actual cash in the deal. I'm looking at a commercial loan at a rate of 5.25% (5 year ARM), amortized over 25 years, and a floating HELOC rate of Prime - 1% (so still 3.75% at the moment). It's hard to see a clear picture since I have two sources of borrowing and they're at different rates.

Thoughts?