Cash-on-Cash Return

A metric that measures the annual pre-tax cash flow relative to the total cash invested in a property. Unlike cap rate, it accounts for financing and shows your actual return on invested capital. Formula: CoC = Annual Cash Flow / Total Cash Invested × 100.

Key Points

Understanding cash-on-cash return is essential for evaluating real estate investments
This metric helps investors compare opportunities objectively
Our Free Snapshot tool automatically calculates relevant metrics for any property

Related Terms

Cap Rate

Capitalization rate is the ratio of a property's net operating income (NOI) to its current market value or purchase price. It's used to estimate the potential return on an investment property, independent of financing. Formula: Cap Rate = NOI / Property Value × 100.

Net Operating Income (NOI)

The annual income generated by an investment property after deducting all operating expenses but before debt service and taxes. NOI = Gross Income - Operating Expenses. It does not include mortgage payments, capital expenditures, or depreciation.

Debt Service Coverage Ratio (DSCR)

A measure of a property's ability to cover its debt obligations. DSCR = NOI / Annual Debt Service. A DSCR of 1.25 means the property generates 25% more income than needed to pay the mortgage. Lenders typically require DSCR of 1.20-1.25 minimum.