What is Cash-on-Cash Return?
Cash-on-Cash Return measures the annual return you’re earning on the actual cash you invested into a property.
Formula:
Cash-on-Cash Return = Annual Pre-Tax Cash Flow / Total Cash Invested
Why It’s Important
Investor-Focused: Tells you how hard your invested dollars are working.
Financing Impact: Shows how leverage (loans) can boost returns.
Practical Decision Tool: Lets you quickly compare different investment opportunities.
Example
You buy a Phoenix fourplex for $800,000.
Down Payment: $160,000
Closing Costs: $10,000
Total Cash Invested: $170,000
Annual Pre-Tax Cash Flow: $20,400
Cash-on-Cash Return = $20,400 ÷ $170,000 = 12%
This means your invested cash is generating a 12% annual return before taxes.
What’s a Good Cash-on-Cash Return?
In Phoenix, 8%–12% is common for well-located multifamily and small commercial properties.
Higher returns may come with more risk or management challenges.
Final Thoughts
Cash-on-Cash Return helps you decide whether an investment is worth the cash you’re putting into it — but it’s only one part of the bigger picture. Always pair it with other metrics like Cap Rate, IRR, and appreciation trends.
As your Phoenix investor-friendly agent, I’ll help you evaluate every angle so you can make confident investment decisions.
📞 Contact Me Today
Brian Harris
Investor-Friendly Real Estate Agent
📍 Phoenix, AZ
📧 [email protected] | 📞 602-684-0198
🌐 www.azdreamsource.com