Glossary term
Cash-on-Cash Return
Cash-on-cash return is a year's cash flow after loan payments divided by the cash you invested. It shows the yearly yield on your own money.
The formula is annual pre-tax cash flow / total cash invested. Cash flow here is NOI minus debt service. If a property produces $60,000 of cash flow after the loan payment and you invested $1,000,000 in cash, the cash-on-cash return is 6 percent.
Unlike cap rate, cash-on-cash return includes the effect of financing, so the loan terms change the answer. It also looks at a single year, not the full hold, and it does not include profit from a sale.
Owners use it to see how much income their equity earns each year, often alongside IRR and equity multiple for the full picture.
Need someone who lives in these numbers?
We manage, model and report on multifamily every day. Tell us about your property.