Cash on cash metric

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I would love to see a metric for Cash on Cash.

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@kevin.n.hendrickson - Yes, we intend to add this metric to the dashboard but have some work to do first around tracking cash in to get the correct denominator for each calculation.

How do you figure your cash in number for the denominator? Is it simply acquisition price + closing costs + initial capex, less net debt proceeds?

If others would also like to see a cash on cash metric added, please click the heart on Kevin’s original post to register your vote. If you have specific thoughts on how the calculation should work, just add your reply here.

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Yes, downpayment + closing costs and any other costs that went into buying the property. I use this for the calculations

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Agree with Kevin as well:

Down Payment + Closing Costs + initial Capital Expense to get the property to market or stable. This sum would be the Investment for ROI or CCR. However, overtime, if leveraged with debt, the CCR would become obsolete and you’ll want to look at ROE (Return on Equity). I think Stessa would stand out if they can display CCR vs ROE. Let me know if you’d like to discuss further.

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Totally agree with the CCR and ROE, both are important to track.

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Would love to see cash on cash ROI as well as cash on cash ROI with principal paydown. This is one of the most important metrics for an investor in tracking overall profitabiltiy of investment.

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@krathman @matthew.kurkowski @jason.s.fung @kevin.n.hendrickson
Thanks for everyone’s input. We’re working on this internally and are currently defining the denominator for the CoC metric as follows:

Acquisition Price
(+) Closing Costs
(+) Loan Costs
(-) Loan Proceeds
(+) Any Cash Flow Shortfalls Prior to Placed in Service Date (due to capex, mortgage, etc.)
= Cash In

For this first iteration, we do not plan to adjust the “Cash In” calculation for any cash flow shortfalls that occur after the Placed in Service Date, regardless of reason.

Does this approach line up with how you typically calculate the denominator for CoC?

We’ll tackle the numerator and then define “equity” a bit later…

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Yes, this lines up perfectly with how we currently calc our denominator for COC return. Thanks for getting this into the tool, we really appreciate it!

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Devin,

I’d ensure the down payment is included, possibly falls under “Cash Flow Shortfalls”. The terms look correct to me based on the definition given. Biggest thing is to include the capital expenditures to get the property up and running (if applicable).

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COC & ROE are my two most important metrics I track.

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Good news! We’ve just launched the new Cash-on-Cash metric for all Stessa dashboards. Thanks to everyone on this thread for your great suggestions.

For this initial feature release, you’ll now see your annualized cash-on-cash return for the most recent full calendar month. Also noted is your total “cash in” amount, which is used as the denominator in the return calculations.

Click “View Monthly Cash on Cash” to show a 12-month historical plot of each month’s cash on cash return. Hover your cursor over any particular data point on the chart to see the actual percentage.

We’re working on further improvements, including adding a trailing 12-month average return figure.

Finally, we also hope to add Return on Equity as a companion metric in the near future.

@jrvoncannon @jason.s.fung @krathman @matthew.kurkowski @kevin.n.hendrickson

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Thanks! Having trailing 12-month average as well as total lifetime average (i.e. if you’ve owned property for 2 years, have the trailing total 2 year CoC) both on the 12 month chart would be great as well. Thanks for adding this feature.

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Thanks Devin, both CCR and ROE are valuable metrics to me as well. I like this hack at the CCR, if I have more ideas I’ll send them your way. Enjoying the platform/service. …now for that Android App :slight_smile:

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Curious other investors thoughts. I just bought a property and put $140k as my down payment, paid $5k of closing costs, and put $20k into the property as cap ex. I noticed Stessa shows my total ‘cash in’ as just $145k, and does not include my initial cap ex upfront as part of my cash in. Shouldn’t cap ex always be included as part of your ‘cash in’ if its coming out of your pocket, and not from operations from the property?

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I agree here. Most of my projects take around 3-6 months to complete (which is beyond the 60 days that the CoC currently takes into account), and the property is not “in-service” until the renovations are complete. I would like to request that capex for cash on cash calculations take into account all cap ex until the unit is put “in-service”, i.e. vacancy is being monitored.

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Thanks for implementing the CoC metric. I know definitions vary, but for the numerator can we add a way to include late cycle/subsequent capex costs in the net cash flow numerator (free cash flow). Otherwise, the metric completely misses the negative CoC impact of the large repairs/replacements during the life of the investment.
Thanks!

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We’ve now updated the cash-on-cash metric to use a new “date placed in service” as the cutoff for calculating the “cash in” amount (denominator). We expect you’ll find the new calculation to be more flexible. Be sure to set a “date placed in service” for each property to dial in your cash-on-cash returns.

For a full explanation of how it works, check out Understanding Your Cash-on-Cash Return.

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I’m still seeing some bugs in the calculation. It does not seem to match your description for my portfolio. Maybe there’s a bug?

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Agreed. Numbers are definitely off somewhere.

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To check your cash-on-cash calculation, please be sure that:

  1. Your mortgages all include accurate “Original Loan Balance” amounts.
  2. You have not already refinanced all of your cash out of the deal.
  3. You have inputted a valid “Date Placed in Service” for each property.
  4. Your Net Cash Flow report for the months in question looks accurate.

Also note that while the cash-on-cash metric will calculate properly at the Property and Portfolio levels, we’re still tweaking the “All Properties” calculation for users who have multiple Portfolios.

If you’ve checked all inputs and still believe there’s an error in the calculation, please open a 1:1 support conversation by clicking on the blue circle once you’re logged in.