Dec 02, 2023

WSO Community -

I’m working on a value add model trying to get my modeling down Pat for interview tests and currently practicing on a MF Value Add model. I have the cash on cash formula running through and in the sale year, the cash on cash is coming out to 200%+. Tbis feels wildly incorrect, can anyone lead me to what may be the problem? Happy to provide a screenshot of the formulas I’m working with for my COC line item

Follow your formula through and it should be clear. Alt + m + v. You'll start pissing people off real quick if you don't figure out/investigate your problems first before asking for help.

Chances are you are including the sale price in your formula. Check that. Just back the sale price out. Alternatively, do the following:

cash on cash = (NOI less capex less debt service + debt or equity future funding) / equity

Yep - for sure the sale price included.

Question re COC to all of you: when you calculate COC for a say 5 year period do you

1. take your monthly / quarterly COC and calculate an average over the whole hold period or
2. take monthly / quarterly COC and calculate a value per year and then create the average of the 5 years?
3. Different topic: What do you do with time periods where equity needs to be paid in because of vacancy e.g.. do you just increase the equity basis or what do you do?

Cheers

This was the problem, thank you. Why wouldn’t you include the sale proceeds in cash on cash though if it is altering the cash you get in that year? (Might be a silly question)

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