CoC · Equity dividend rate
Cash-on-cash return
Cash-on-cash return is annual pre-tax cash flow divided by the total cash you actually put into the deal — down payment, closing costs and rehab. It answers a narrow question well: what does this investment pay me in year one on the money I committed? It ignores principal paydown, appreciation and tax benefits entirely.
Cash-on-cash = annual pre-tax cash flow ÷ total cash invested
Worked example
$3,841 of cash flow on $80,875 invested ($66,250 down + $6,625 closing + $8,000 rehab) is a 4.75% cash-on-cash return.
Rental metric examples use the default $265,000 duplex at $2,650 monthly rent, 25% down and 6.75% over 30 years. Strategy and tax examples use the assumptions stated above rather than that rental deal.
The mistake to avoid
Where this is calculated
The cash on cash return calculator computes this from your own numbers and shows the arithmetic expanded. Annual pre-tax cash flow over every dollar of cash you put in — down payment, closing costs and rehab.
Related terms
- Capitalization rateThe capitalization rate is net operating income divided by price, expressed as a percentage.
- Gross rent multiplierGross rent multiplier is purchase price divided by gross annual scheduled rent.
- Internal rate of returnInternal rate of return is the annual discount rate at which the deal's cash flows — the money in at purchase, the cash flow each year and the net proceeds at sale — net out to zero.
- Equity multipleEquity multiple is total cash returned divided by total cash invested, with no adjustment for time.
- Break-even occupancyBreak-even occupancy is the occupancy at which annual pre-tax cash flow is exactly zero — the share of gross potential income the property must collect to cover operating expenses and debt service with nothing left over.
Back to the full glossary — 21 terms with formulas and worked examples.