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What is a Cash-on-Cash Return?

Cash-on-cash return is the rate of return an investment earns after expenses based on the actual cash invested, calculated by dividing annual pre-tax cash flow by total cash invested, assessing how efficiently cash or equity creates cash flow allowing investors estimate cash flow per dollar invested.

Comprehensive Definition and Formula

  • Cash-on-cash return = annual cash flow ÷ total cash invested
  • Annual pre-tax cash flow = NOI − debt service
  • Uses pre-tax annual cash flow typically
  • Rate of return ratio calculating cash earned

Purpose and Benefits

  • Estimates cash flow per dollar invested
  • Assesses cash flow efficiency
  • Analyzes cash flows individually
  • Simple financial metric assessment

Cash-on-cash return is the rate of return after expenses based on cash invested, calculated by dividing annual cash flow by total cash invested assessing efficiency.

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