Cash-on-cash return measures the return on the cash invested in relation to returns from cash flow from the investment property. It doesn’t take into consideration the debt included in the real estate transaction which is the case with most commercial properties as well as the projections of Proceeds/Profits from Refinance or Sale. See ARR and IRR.
For example: If you invest $100,000 and receive returns of $35,000 then the total Cash-on-cash return is 35%.
Formula: ($135,000 – $100,000 ) / $100,000 = 35%
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