Definition
Cash-on-cash return shows actual percentage return on your out-of-pocket investment. Strong returns are 8-12%+, but balance with long-term appreciation.
Where you’ll meet it
What am I trying to get out of this: cash flow, appreciation, or both?
See it in Buying an investment property · Step 1About this term
Cash-on-cash return is particularly valuable for investors who use leverage (mortgages) to purchase properties. Unlike cap rate, it accounts for financing and shows the actual percentage return on the investor's out-of-pocket cash. This metric helps investors compare the true efficiency of their capital deployment across multiple investments.
Pro Tip
Strong cash-on-cash returns (8-12%+) are attractive, but balance with appreciation potential.
Example
Investing $50,000 cash (down payment plus closing) for annual cash flow of $6,000 equals 12% cash-on-cash return