Cash on cash return is a measurement for the value of a rental investment. cash-on-cash return tells the investor what the percentage return is on his or her invested funds.
To calculate cash-on-cash return, first determine the cash proceeds received from the title company after selling the property. Subtract taxes from the cash proceeds, and divide the remainder by the amount of cash that the investor invested in the property. This would include the down payment, as well as any cash paid to rehab the property or for various fees.
In the example below, the investor received $37,104 for the sale of the property. The investor invested $70,000 for down payment as well as other various repairs. The investor paid a 20% tax on the proceeds, this means the investor received $29,683 after taxes. $26,683 divided by $70,000 = 0.424. The cash-on-cash return for this fix and flip investment is 42.4%
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