cash on cash return

Definition

A performance metric showing the annual pre-tax cash flow divided by the total cash invested, expressed as a percentage. It's how rental property investors measure whether they're getting a decent return or just being a charity for tenants.

Example Usage

After all expenses, my duplex generates a 9% cash on cash return, which beats my stock portfolio and requires way more toilet-related phone calls.

Origin

Investment analysis terminology from the 1960s-70s

Fun Fact

Most investors consider 8-12% a solid cash on cash return, though what qualifies as 'good' varies wildly based on market conditions and whether you enjoy midnight plumbing emergencies.

Source: Real estate investment analysis terminology

Related Terms

Intermediate

contingencies

The 'what if' scenarios that keep project managers up at night and pad contracts with extra zeros. In real estate, these are the escape clauses buyers insert into offers like 'contingent on inspection' or 'contingent on not discovering the basement is haunted.' Essentially, it's the professional way of saying 'but only if everything goes according to plan,' which it never does.

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Intermediate

takeoff

In construction and real estate, the detailed process of measuring and quantifying all materials needed for a project from blueprints, basically turning drawings into shopping lists. Also known as "quantity takeoff," it's the unglamorous math that prevents contractors from discovering mid-project that they're three truckloads of concrete short. Get it wrong, and someone's explaining cost overruns to very angry people.

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Intermediate

change order

A formal document modifying the original contract, usually adding more work, more time, or more money—often all three. It's how contractors politely inform you that your 'simple request' will cost an additional $5,000. Change orders are proof that nothing is ever as simple as the original estimate suggested.

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Beginner

open house warrior

Someone who attends multiple open houses with no intention of buying, just enjoying free snacks and architectural tourism. They're often retired, bored, or working for a competing agent on reconnaissance.

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Advanced

gcfr

Ground Coverage Floor Ratio—the percentage of a lot covered by a building's footprint, regulating density and preserving open space. A municipality's way of preventing you from covering every square inch with structure.

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PITI

The four horsemen of monthly housing payments: Principal, Interest, Taxes, and Insurance. It's the total amount you'll shell out each month to keep a roof over your head and the bank off your back.

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