Cash-on-cash Return

A cash-on-cash return is frequently used in real estate dealings. Cash-on-cash return is the rate of return used in real estate transactions to evaluate the cash income that is earned on the total cash invested on the property. The cash-on-cash return unit calculates the return for the ongoing period, (generally one year), instead of the life span of the property.

This return also predicts estimated earnings and expenditures. 

 

The formula used to determine cash-on-cash return is: –

Cash-on-cash Return = (Annual Pre-Tax Cash Flow)/Total cash invested

Where,

APTCF = (GSR + OI) – (V+OE+AMP)

        GSR = Gross Scheduled Rate

           OI = Other investments

           V = Vacancies

           OE = Other expenses

AMP = Annual mortgage payments

This help page and the information contained herein is provided for informational and discussion purposes only and is not intended to be a recommendation for any investment or other advice of any kind, and shall not constitute or imply any offer to purchase, sell or hold any security or to enter into or engage in any type of transaction.

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