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.