Cash-on-Cash Return
The percentage return on the actual cash you invested
Cash-on-cash return is a simple metric real estate investors use to measure how much cash a property generates in a year compared to the cash they put into the deal. It focuses on the money you can actually spend—your annual pre-tax cash flow—rather than paper gains like appreciation.
The “cash in” typically includes your down payment, closing costs, and any upfront repairs or improvements required to stabilize the property. The “cash out” is the annual pre-tax cash flow after operating expenses and debt service.
Cash-on-Cash Return = (Annual Pre-Tax Cash Flow ÷ Initial Cash Investment) × 100
Cash-on-cash return is especially useful for comparing different investment opportunities because it shows how efficiently your cash is working. It does not capture equity growth from principal paydown or long-term appreciation, so investors usually pair it with metrics like NOI, cap rate, and IRR to understand total return.