Cash On Cash Return Calculator
Introduction
Calculating the cash on cash return is crucial for real estate investors to evaluate the profitability of their investments. A cash on cash return calculator simplifies this process, providing accurate results based on specific financial inputs.
How to Use
To utilize the cash on cash return calculator, enter the following details:
- Initial Investment: The total amount of money invested upfront.
- Annual Net Operating Income (NOI): The income generated from the property after subtracting operating expenses.
- Financing Costs: Any expenses related to financing, such as loan origination fees or closing costs.
- Down Payment: The initial payment made towards purchasing the property.
Click the “Calculate” button to obtain the cash on cash return percentage.
Formula
The formula for calculating cash on cash return is as follows:
Example Solve
Suppose an investor purchases a property for $200,000, with an annual net operating income of $25,000, financing costs of $5,000, and a down payment of $40,000.
Cash on Cash Return (%) =15.15%
FAQs
Q: Why is cash on cash return important?
A: Cash on cash return helps investors assess the profitability of their real estate investments by comparing the annual cash flow to the initial investment.
Q: Can cash on cash return be negative?
A: Yes, a negative cash on cash return indicates that the property is not generating enough income to cover the expenses and financing costs.
Q: What factors can affect cash on cash return?
A: Factors such as property expenses, rental income, financing terms, and market conditions can impact cash on cash return.
Conclusion
The cash on cash return calculator simplifies the evaluation process for real estate investments, providing investors with valuable insights into their potential profitability.