What Is a Cash-on-Cash Return?
A cash-on-cash return is a rate of return frequently used in real estate contacts that calculates the cash income earned on the cash invested in a assets. Put simply, cash-on-cash return measures the annual return the stockholder made on the property in kin to the amount of mortgage paid through the same year. It is considered relatively easy to comprehend and one of the most imperative real estate ROI calculations.
- Cash-on-cash return measures the amount of cash flow relative to the sum of cash invested in a property investment and is calculated on a pre-tax foundation.
- The cash-on-cash return metric measures only the return for the existing period, typically one year, rather than for the life of the investment or scheme.
- The metric can also be used as a estimating device to set a objective for projected incomes and expenses.