Cash On Cash Return
Cash Flow ÷ Invested Capital
The amount of cash flow (rental income less mortgage, taxes, insurance, maintenance) your rental property generates as a percentage of the amount of capital you invested in the property. If your rental generates $10,000 per year in free cash flow and you have invested $50,000 to buy and renovate the property (i.e. down payment plus closing costs and rehab), your cash on cash return is 20%. This is otherwise known as return on invested capital or (ROIC).
It is possible to have an incalculable Cash On Cash Return if you use the BRRR method highly effectively and pull all or more than the cash you originally invested out of the property by refinancing.
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