Cash-on-Cash Return

Real Estate

Cash-on-Cash Return is annual pre-tax cash flow divided by total cash invested, including down payment and closing costs. A property with $10,000 annual cash flow and $100,000 cash invested has 10% cash-on-cash return. Unlike cap rate (uses purchase price), cash-on-cash uses actual equity invested — accounting for leverage. A property bought with 25% down typically has higher cash-on-cash return than the same property bought with cash, but more risk. Compare across investment opportunities including non-real estate alternatives. First-year cash-on-cash is the standard metric; track year-over-year as rents rise and the loan amortizes.