Cash-on-Cash Return

Advanced 🏠 Real Estate

Definition

Annual pre-tax cash return divided by initial cash invested, the true measure of investment profitability in real-world terms.

Example Usage

Despite a 5% cap rate, the cash-on-cash return is 15% due to favorable financing.

Origin

Investment analysis terminology used primarily in real estate

Fun Fact

Cash-on-cash returns can exceed cap rates when leverage (financing) is used effectively.

Source: Real Estate Investment Analysis

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