Loan pay down calculated into coc Roi

[Chris K.]

Hi everyone,

Why is the loan pay down not calculated into coc roi? Meaning, if I have tenants (short term or long term) where the cash flow covers my mortgage payment?

I will use basic example to help clarify.

Down payment of $20,000

mortgage payment is $1000

All Expenses (capex, utilities etc) : $500

Monthly income $1,550

Positive cash flow of $50 monthly x 12 = $600 annually

600/20,000 = 3% (bad roi)

But I am also building equity with loan pay down of 1,000 monthly so should I not be calculating this into my roi technically????

That would make $12,600 annually. And if it’s not calculated into roi, why is it not?

Thank you!