Dominating the Real Estate Market with CoCROI

In a previous post, I wrote about the importance of cash flow. This metric is incredibly important to know but in the post, I mentioned that CoCROI is actually what matters. CoCROI stands for Cash on Cash Return on Investment. In this post, I’m going to cover the ins and outs of this metric and how it will help you in your investing journey.

One of the required pieces to have in order to solve for CoCROI is cash flow. You will want your cash flow to be positive but what amount makes it a good investment? For example, an investment of $1,000,000 producing $150 of monthly cash flow would not be a good investment. You may be asking “How do I find out what is a good investment?” This is where CoCROI comes in.

Basically, CoCROI is a ratio that compares the amount of cash flow we got in a year to the amount of money we invested into the deal. Put simply:

CoCROI = Total Annual Cash Flow / Total Investment

In order to figure out if your potential property is a good deal you will want to compare it to something else. CoCROI will allow you to do just that. You will be able to see how your real estate deal compares to other investments such as the stock market.

Typically the stock market has averaged around 7% so we will want to do better than this. The amount really depends on your own goals and what you want out of the deal. Are you going for a home run or just a base hit that is easy to manage and is more of a learning opportunity?

One bonus to CoCROI in real estate investing is that it doesn’t even count in many of the other benefits that come along with investing. These are loan paydown, tax benefits, and appreciation. These three things are incredibly powerful and will help you to build wealth.

I encourage you to do some research to find out your goal CoCROI. Begin searching and analyzing deals to find one that meets your criteria. Pursue deals, work hard, and wealth will follow. You’ve got this!