When comparing and analyzing properties, we prefer to use the "Cash-on-Cash" (COC) return rather than the Return on Investment (ROI). We do this for several very important reasons.
To start, we calculate ROI by combining:
The COC is simply the annual cash flow divided by the cash required to purchase the property.
We believe that the COC gives a better "apples to apples" comparison for cashflow investors because:
In short, if you are looking to invest for cash flow, COC is the figure to know!