September 22nd, 2008

How Cash-on-Cash Return Is Used for Investment Comparisons

Learn all about cash-on-cash return, including its meaning, benefits and shortcomings, why real estate investors use it, and its formula.

In this real estate investing article, we want to discuss cash-on-cash return by exploring its meaning, benefits and shortcomings, popularity amongst real estate investors, and then the cash-on-cash formula alongside several examples.

So let’s get started.

The cash-on-cash return (or equity dividend rate) measures the ratio between a property’s anticipated first year’s cash flow before tax (CFBT) to the amount of initial cash investment made by the real estate investor to purchase the rental property.


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