cash on cash return on investment

[Steve Haake]

Novice real estate investor here.  Can someone help me understand coc roi.  I understand it's cash on cash return on investment.  When I'm analyzing deals, it's coming up as 0.02% or even negative percent if i'm overly conservative with the expenses.  From what I read a good coc roi is 7-10%.  I don't know if I'm interpreting the coc roi correctly.  Thanks for your help.

[Katlynn Teague]

I would love to help! 

When analyzing a deal, look at the total cash coming out of pocket and divide that by the estimated ARV.

For example, the property costs $200,000 and needs $60,000 in work with an exit of $340,000. You buy this property in cash, so you do not have any holding/lender fees. So you are all in on this property for $260,000 and you sell for exactly $340,000 with 6% resale costs at $20,400. Your new cash out-of-pocket is $280,400. You would divide $280,400/$340,000, leaving you with an ROI of 82%.

I hope this helps!