What is cashoncash return in real estate?
Cash-on-cash return measures the annual pre-tax cash income generated by a real estate investment relative to the actual cash invested, providing a straightforward way to evaluate income-generating performance.
How Cash-on-Cash Return Is Calculated
- Annual pre-tax cash flow divided by total cash invested
- Expressed as a percentage reflecting yearly income return
Why It's Useful
- Focuses specifically on actual cash income, excluding appreciation or financing complexities
- Useful for investors prioritizing steady income generation over long-term appreciation
Limitations to Consider
- Does not account for property appreciation or eventual sale proceeds
In summary, cash-on-cash return offers a clear, straightforward measure of annual income relative to cash invested in a property. This metric is particularly useful for income-focused real estate investors.
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