What is Cash-on-Cash Return?
What is Cash-on-Cash Return?
Section titled “What is Cash-on-Cash Return?”Cash-on-Cash Return measures how hard the actual cash you put into a property is working, each year:
Cash-on-Cash Return = Annual Net Cashflow / Cash Invested × 100- Annual Net Cashflow — rent, less operating expenses, less the mortgage payment (principal + interest) — this year’s actual cash result, pre-tax.
- Cash Invested — the real money you put in at settlement: deposit, stamp duty, legal fees, mortgage fees, building/pest inspection fees, LMI, and fixtures & fittings.
Where you’ll see it
Section titled “Where you’ll see it”- Dashboard — a portfolio-wide figure, blending every owned property’s cash invested and net cashflow.
- Property → Cashflow tab — the figure for that one property.
Why it’s different from Yield
Section titled “Why it’s different from Yield”Gross and Net Yield divide rent by the property’s value — a measure of the asset’s income performance regardless of how you financed it. Cash-on-Cash Return divides cashflow by your own money in the deal — a measure of how well your deposit and up-front costs are performing, debt included. A highly-geared property can show a strong (or a very negative) Cash-on-Cash Return even when its yield looks unremarkable, because leverage amplifies the result in both directions.
How to read it
Section titled “How to read it”A positive number means the property returned more in cashflow this year than you’d get leaving that same cash in a savings account — a negative number means it cost you money to hold, on top of your original investment. Because it’s driven by leverage, Cash-on-Cash Return swings more than yield does as interest rates or rents change — it’s worth revisiting whenever your mortgage rate resets.