reference
glossary.
25 terms
definition
Cash on cash return is a real estate investment metric that measures the annual cash flow relative to the amount of cash invested in the property. It's calculated by dividing the annual pre-tax cash flow by the total cash invested, expressed as a percentage. This metric helps investors evaluate the efficiency of their cash investment and compare different investment opportunities.
examples
- —After investing $50,000 cash and receiving $4,000 in annual cash flow, the investor achieved an 8% cash on cash return.
- —Real estate investors often target a cash on cash return of at least 8-12% for rental properties.
- —The property's cash on cash return improved from 6% to 10% after refinancing at a lower interest rate.