How to Calculate Cash-on-Cash Return for Real Estate

Investors can easily determine their cash-on-cash return through a simple calculation.  This involves evaluating the income and expense calculations of a property to determine the pre-tax cash flow. Subsequently, dividing this amount by the total cash invested in the property yields the cash-on-cash return.

Here's a simplified explanation:

To calculate your cash-on-cash return:

  1. Evaluate the income and expenses associated with the property to determine the pre-tax cash flow.  Example: Pre-Tax Cash Flow = $26,000

  2. Divide the pre-tax cash flow of the property by the total amount of cash invested in the property.  Example: $26,000 (Pre-Tax Cash Flow) / $190,000 (Total Cash Invested in Property) = 0.1368 or 13.7% Cash-on-Cash Return

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