Calculating Cash on Cash Return: A Simple Guide to Investment Success

Last updated: March 31, 2025

You want to measure how well your investment is performing. Cash on cash return is a simple way to figure out if you're receiving enough income for every dollar you put in.

You'll see it used in real estate and other ventures. It helps you gauge immediate earnings without a complicated formula. Calculating this metric can guide your decisions on where to put your money next. It's also useful for comparing multiple opportunities side by side. When you know your cash on cash return you can spot investments that deliver steady returns or hidden gems that might multiply your wealth.

Understanding Cash On Cash Return

Cash on cash return looks at how much annual pre-tax income you receive relative to the total amount of cash you put into a real estate property or similar venture. It uses a simple formula that compares the yearly income from rents or other sources with the total cash you spent. Lenders, investors, and analysts rely on this measurement for quick insights on how your real estate holdings might perform (Federal Reserve, 2023).