Cash-on-Cash Return

Cash-on-cash return measures annual pre-tax cash flow as a percentage of total cash invested, accounting for leverage effects. It is the primary metric for evaluating levered investment performance.

CalculationFormula
Cash-on-cash(Annual net cash flow / Total cash invested) times 100
Total cash investedDown payment plus all acquisition costs
Annual net cash flowNOI minus annual debt service
Pre-tax basisDoes not account for tax effects
Leverage Impact ExampleAll-Cash vs 75% LTV
Property valueAED 1,500,000 both scenarios
Cash invested: All-cashAED 1,590,000 (includes fees)
Cash invested: 75% LTVAED 420,000 (25% down plus fees)
Annual NOIAED 75,000 both scenarios
Annual debt service: 75% LTVAED 48,000
Net cash flow: All-cashAED 75,000
Net cash flow: 75% LTVAED 27,000
Cash-on-cash: All-cash4.7%
Cash-on-cash: 75% LTV6.4%


Related Terms

Cash FlowDiscounted Cash Flow (DCF)Return on Investment (ROI)LeverageLeverage RatioNet Operating Income (NOI)Net YieldInternal Rate of Return (IRR)Internal Rate of Return (IRR)Equity Multiple

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