Cash on Cash Explanation

[Michael Pence]

Someone please explain what Cash on Cash return means.

Thanks.

[Joe Villeneuve]

It refers to how much of your cash down payment is recovered with the cash flow during the first year only, and is recorded as a percentage of that number.

Example:

1 - Property cost = $100k
2 - DP = 20% = $20k
3 - Cash Flow in first year = $4k

Formula:  Cash Return (cash flow 1st yr)     =   $4000    =      $20%
                     Cash DP                                            $20,000