Cash-on-cash return

Annual pre-tax cash flow divided by total cash invested. The leveraged year-one return.

Cash-on-cash isolates how hard your actual cash works. The numerator is annual cash flow after debt service; the denominator is down payment + closing costs + initial rehab. Common targets are 8-12%, but interest rates and cap rates move that goalpost. Doesn't account for principal paydown, appreciation, or tax benefits — it's a year-one snapshot.