Cash-on-Cash Return

The annual pre-tax cash flow divided by the total cash invested. Used by real estate investors to evaluate the profitability of income-producing properties.

Unlike cap rate, cash-on-cash return accounts for your mortgage: it divides the cash left after debt service by the down payment, closing costs, and rehab you actually paid. That makes it the metric of choice for evaluating how hard your out-of-pocket dollars are working on a financed deal.