What is Cash-on-Cash Return in Real Estate?

Cash-on-cash return measures how much income a property generates from the cash invested. This calculation is commonly used in real estate transactions. Put In simple terms, cash-on-cash return is the return the investor made on the property compared to the number of mortgage payments made during the same year. It is one of the most important calculations for real estate ROI.

The cash-on-cash return can be used to measure the performance of commercial real estate investments. The term is sometimes used interchangeably with the cash yield of property investment. A cash-on-cash rate provides investors and business owners with a way to analyze the potential cash flow of a property over a long period of time.

As is the case with most commercial properties, when debt is included, the actual return on investment is different from the ROI.

ROI calculations include the return on the total investment, while cash-on-cash calculations only examine the return on the actual amount invested, providing a more accurate analysis of investment performance.

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