A measurement of an investment’s performance often used in commercial real estate transactions, but not exclusively. Sometimes expressed as cash yield, this cash return differs from a return on investment (ROI) which includes the Total Return on investment.
Unlike ROI that includes the total return on investment, cash-on-cash only measures the return on the cash invested.
The formula for cash-on-cash is:
Cash on Cash Return = Annual Pre-Tax Cash Flow / Total Cash Invested, where: APTCF = (GSR + OI) – (V + OE + AMP)
GSR = Gross scheduled rent; OI = Other income; V = Vacancy; OE = Operating expenses; AMP = Annual mortgage payments
Pertains to real estate, debt, and equity offerings.
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