For all the math geeks out there, here's a question on how to handle Capex in your Cash-on-Cash calculation. Bought a property for $150,000 already rentedAfter 12 months I did a $6,000 renovation I knew going in I had to do. I could have done that from the get-go and bundle all up as my initial cash invested, but I waited 12 months and did the renovations later.Now I'm trying to figure out the right math, and it gives me completely different results:1. Consider the $6k renovations as an expense: Total Cash Invested: $35,000Net Annual Income: $4,000 cashflows - $6,000 renovations = -$2,000Cash-on-Cash Return = Net Annual Income / Total Cash Invested = -5.7%2. Consider the $6k as part of the initial investment, even though it happened 12 months later: Total Cash Invested: $35,000 + $6,000 renovations = $41,000Net Annual Income: $4,000 cashflowsCash-on-Cash Return = +9.7%In one scenario I end with -5.7% and the other +9.7%, just by the way I move that $6k expense. I don't want to play the numbers and make a fool of myself, so I was wondering how you guys would handle this :)

@Bruno Tavares Hi Bruno, awesome question. I think the answer depends on who you're presenting the information to? Also, depending on the type of expenditure, you might want to prorate the expense to both capex and operating expenses. The utility of the COC metric is to understand how strong the deal is (given how much cash it takes to get into it) when it's running on "cruise control." Obviously no property is truly that easy, but explaining COC when you're doing renovations is irrelevant. COC is a great metric for understanding how hard your money is working for you in the deal, and in turn using to decide whether or not to pull the trigger on closing or not. To answer your question, I think the best way to handle this situation is to take the capex out of the equation and explain to whoever your presenting this to that the capex is what it takes/took to get the deal going in order to achieve the COC levels that you are projecting/experiencing.I hope this helps you Bruno!Kenny Reimer

hmm; Post-closing, the CoC, CapRate are still the same. Any accounting system will keep you updated on the monthly NOI.Here's some metrics which are not readily available.Givenpurchase:- id, price, downpayment(dp), rate, principal, interestdebt :: id, price - dp - sum(principals)equity :: price - debtReturn on invested capital :: (for one property it's just ROI, for multiples it's sum(roi) )Monthly expenses vs budgetDebt to equityProjected earnings

That clarifies a lot! Thank you @Kenneth Reimer, @Jeff B. and @Kevin Siedlecki.Cash-on-Cash is great for analyzing a deal, but not so valuable for the ongoing operations.This question came up because I'm a bit of a nerd for dashboards and I'm building one for tracking my rentals :)There's a lot of material around analyzing and closing deals, but unfortunately not so much on metrics for post-closing and ongoing performance.

The 6k is a maintenance/repair activity, so it gets expensed. The CoC is a day-1 metric and we don't pre-date out accounting data.If the 6k was for despreciable class assets, then it could be amortized for the class life, but discuss with your CPA about a section 179 write-off for the whole amount.

@Bruno Tavares - Both previous posters are right. At the end of the day, your net worth (assuming the price was market value) is $2000 less than it was before the purchase, but you've given yourself a $4000 cashflow indefinitely. That $6000 will not be an expense every year, so your one-year loss doesn't tell you anything about the long-term viability or performance of the investment, which is the best use of the COC ROI metric.For tax purposes, though, you have to classify it as @Jeff B. explains.