Need clarity on cash on cash ratios

[Dan Barentine]

A broker asked, "What are your cash on cash ratio requirements?" I'm not sure exactly what he means by this. Is this the same as IRR? Thanks for the clarity

[Greg Dickerson]

Originally posted by @Dan Barentine:

@Todd Dexheimer Thank you for your quick response.  So what do you think the Broker is trying to find out by asking this question? In this scenario, I've just reached out to make a connection and get some deals flowing. We don't have a particular property in mind yet so I'm not sure how to calculate these ratios as it seems like I would need to underwrite the deal to see what the ratios would be on a deal by deal basis. Maybe I'm way off here.  

 The broker is either trying to narrow down the search or find out how experienced you are or both.

Cash on cash is the return you get on cash invested on an annualize basis. IRR is the total return on the investment over time which would include the cash-flow earned along the way plus the profit on the sale at the back end divided but the amount of time the cash was invested. This is over simplification but explains the general concept.