How to calculate COC ?

[Robert Andrade]

So I've read that you divide the yearly rent by the down payment or cash in the deal? Is that close to right? So if I have a 3plex and I occupy 1 of the units, how do I calculate COC? I did a search and really couldn't find the answer to this in the forums that I understand

[Joe Villeneuve]

Don't make this more complicated than it needs to be.  It's a simple formula based on a simple concept....Cash out divided by Cash in over the course of the first year ONLY.  This gives a percentage which is the ConC return.  Remember, we only talking about cash...not using any alternative adjustments like depreciation, inflation, etc...

Cash out        = Cash on Cash Return
Cash in 

For example #1:

If I paid all cash for purchase and rehab of $100,000 for a property.  I rented that property and the cash flow from that property (the actual cash you got to keep), was $500/month...or $6,000/year, the formula would look like this:

Cash out    ($6,000)  = Cash on Cash Return (.06) = 6%
Cash in   ($100,000)

For example #2:

If I paid cash for downpayment and rehab of $60,000 for a property, and the rest ($40,000) was from a loan. I rented that property and the cash flow from that property (the actual cash you got to keep), was $250/month (this includes subtracting the loan pmt)...or $3,000/year, the formula would look like this:

Cash out ($3,000) = Cash on Cash Return (.05) = 5%
Cash in ($60,000)

For example #3:

If I paid cash for downpayment only of $20,000 for a property, and the rest ($80,000) was from a loan. I rented that property and the cash flow from that property (the actual cash you got to keep), was $200/month (this includes subtracting the loan pmt)...or $2,400/year, the formula would look like this:

Cash out ($2,400) = Cash on Cash Return (.12) = 12%
Cash in ($20,000)

....last one...

For example #4:

If I paid no cash for a $100,000 for a property, and the full ($100,000) was from a loan. I rented that property and the cash flow from that property (the actual cash you got to keep), was $150/month (this includes subtracting the loan pmt)...or $1,800/year, the formula would look like this:

Cash out ($1,800) = Cash on Cash Return (infinite) = ??%
Cash in ($0)