10/20/2026
๐ต Your money has a job. Howโs its performance review looking? ๐
Itโs Term of the Day Tuesday, and this week weโre talking CASH-ON-CASH RATE, also called cash-on-cash return!
๐ This measures a propertyโs annual before-tax cash flow relative to the actual cash you invested.
Hereโs how it works:
๐งฎ The formula: Annual before-tax cash flow รท total cash invested ร 100.
๐ฆ Count the cash you put in โ Your down payment, closing costs, and upfront improvements can all be part of that investment.
๐ธ Count whatโs left over โ Cash flow after operating expenses and mortgage payments, before income taxes. Rent collected alone doesnโt tell the whole story!
๐ข A simple example: Invest $100,000 of your own cash and receive $8,000 in annual before-tax cash flow. Thatโs an 8% cash-on-cash return.
๐ Know what it leaves out โ Appreciation and equity built through loan principal repayment arenโt included. This measures cash flow, not your total investment return.
โ๏ธ Financing matters โ Different loan terms can change the result, even for the same property. More borrowing doesnโt automatically mean a better return.
Because โthe building collects rentโ and โthe investment generates cashโ deserve two different conversations. ๐
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