Cash-on-cash return
Yearly cash flow divided by the cash you put in, shown as a percentage. Answers: what am I earning on the money I actually invested? Different from cap rate because it accounts for financing.
Every term like this one lights up in the step you're on.
Free to set up. No credit card.Part 1 of 4
Why a seller cares
Cash-on-cash is the return on the money the investor actually put in, after financing. It is why a leveraged buyer can pay more than a cash buyer for the same rental and still hit their target.
Part 2 of 4
A simple example
An investor puts $50,000 down on your $200,000 rental and clears $4,000 a year after the mortgage. That is an 8% cash-on-cash return.
| The arithmetic | The number |
|---|---|
| Cash in | $50,000 |
| Cash flow after the mortgage | $4,000 a year |
| Cash-on-cash return | 8% |
Cash-on-cash measures the return on the down payment, and the down payment is the buyer's choice.
Part 3 of 4
What people get wrong
That it is the same as cap rate. Cap rate ignores the loan; cash-on-cash is all about it.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
One piece of your sale. Here is where all the pieces live.
In your room, this word explains itself where it appears.
Keighbor keeps your whole home sale in one place and defines every term like this one right where you meet it, in the step you're on. Free to set up, with or without an agent.