What is cash-on-cash return?

Cash-on-cash return measures the annual cash flow an investment property produces relative to the actual cash you put into it, rather than the total purchase price, which makes it a useful way to compare deals with different financing structures. It is calculated by dividing your annual pre-tax cash flow by your total cash invested, including down payment and closing costs. A highly leveraged purchase can show a higher cash-on-cash return than an all-cash purchase on the same property, even though the property itself performs identically. Joel Boss can walk through this math on specific North Metro Atlanta listings.