what does cash on cash mean, John

In Buying Property - Asked by Paul W. - Feb 3, 2011
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Answer(s)

Jonathan A.
Corporate Investor
Vienna, VA

Cash on cash means the amount of return you receive on the cash you invested. The way to figure it out is to divide the returns buy the amount invested.

Feb 3, 2011
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David K.
Broker/Agent
Schaumburg, IL

Gross income minus a Vacancy factor minus Operating Expenses (does not include Depreciation nor Principle reduction) minus Debt Service (Principle & Interest) = Cash Flow. Divide the Cash Flow by the Downpayment and then multiply the answer by 100. The result equals the Cash on Cash (%).
See my article Return On in the Box App on my LinkedIn profile.

Feb 3, 2011
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Rob B.
Chandler, AZ

Paul....I hesitate to say it, but if you are asking this question you should keep you money under your mattress or buried in the back yard. If you do either of these things you will earn no cash on cash. However, you will be interested in cash-on-cash, if you decide to put your funds into an investment. There are many choices that come with that decision. A few examples being a simple bank savings account; to variations of investment in the stock market, commodities such as gold, and of course our favorite topic commercial real estate. Simply put, how much capital do you put in and how much do you get out? If you get out more than you put in you are getting cash on cash. However, there are many ways to compute the results of cash out. Just make sure the IRS allows your particular way. Get a good mentor Paul, or keep your money in federally insured account and earn a little bit of cash on cash. Otherwise, you may be losing your initial capital. There are many out investment advisors out there that can accomplish this result for you. Good luck Paul..... Rob Baird, CA RE License #544165 (One of the oldest, active licenses in CA) 951 515-5855 Email: rob@capratecommercial.com

Feb 3, 2011
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Pete A.
Broker/Agent
Indianapolis, IN

the correct answer is the first one above. If you buy a property and put a certain amount down and finance the rest, then your cash on cash return (absent additional investment) is the money you keep after expenses divided by the downpayment. Spending additional money on the property increases the downpayment.

Feb 5, 2011
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