Cash-on-Cash Return
Real estateGlossary term
Definition
A measure of annual pre-tax cash flow relative to the total cash invested in a property. Unlike cap rate, it accounts for financing. If you invest $50,000 and receive $5,000 in annual cash flow, the cash-on-cash return is 10%.
Related terms
- Cap RateCapitalization rate measures a rental property's potential return, calculated by dividing net operating income by the property's market value. A property generating $12,000 annually valued at $200,000 has a 6% cap rate. Used to compare investment properties.
- Rental IncomeMoney received from tenants for the use of real estate property. Rental income is considered taxable but can be offset by deductions including mortgage interest, property taxes, insurance, maintenance, and depreciation.
Get advice that uses your real numbers
Warren reads your accounts and explains what terms like this mean for your plan. Free to start, no credit card required.