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Cash-on-Cash Return
Cash-on-cash return compares annual cash flow with the cash invested in a property, expressed as a percentage.
Cash-on-cash return compares annual cash flow with the cash invested in a property, expressed as a percentage. Under the common convention described here, cash flow is net operating income less debt-service payments, before income tax.
Property operations example: identify the reporting year and cash invested, including the down payment, closing costs, and initial improvements when applicable. Keep projected cash flow separate from verified operating results.
Source: J.P. Morgan, Using the cash-on-cash return in real estate, August 12, 2024.
Frequently Asked Questions
Does cash-on-cash return include property appreciation?
No. This periodic cash-flow measure does not include appreciation, equity growth from loan repayment, or proceeds from a future sale.
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