Cash-on-Cash (CoC) Yield

Article of the week

Unnamed Staff (Lark): Cash-On-Cash Yield

Core Ideas

1) Calculation: A property’s cash-on-cash (CoC) yield (aka CoC return) is calculated by subtracting the operating and mortgage interest expenses from the total rental revenue. The result is then divided by the cash invested in the property (including down payment, closing costs and other fees).

2) Significance: Contrary to other popular property profitability metrics, the CoC yield includes the cost of financing the property. Thus, it provides a more accurate measure of the income generated by properties acquired with financial leverage.

3) Limitation: Since the CoC yield does not account for taxes levied on the income, it overstates investors’ realized cash profitability.