Cash-on-Cash Return
The annual return calculated as cash profit (rental income minus all expenses including mortgage payments) divided by the buyer's initial cash investment. Cash-on-cash return reflects actual cash generated by an investment property in a given year. This metric is particularly relevant for mortgaged properties where leverage amplifies returns.
Understanding Cash-on-Cash Return
Cash-on-Cash Return is a vital metric for evaluating investment performance, comparing returns across properties and making informed portfolio decisions. The annual return calculated as cash profit (rental income minus all expenses including mortgage payments) divided by the buyer's initial cash investment. Cash-on-cash return reflects actual cash generated by an investment property in a given year. This metric is particularly relevant for mortgaged properties where leverage amplifies returns. Mastering Cash-on-Cash Return analysis enables you to compare opportunities objectively, forecast returns realistically and track performance against targets.
In Practice
Cash-on-Cash Return frequently appears in Dubai property transactions. For example, when a buyer and seller negotiate terms, professionals reference this concept explicitly to clarify rights, obligations and timelines.