How to Calculate Cash-on-Cash Return
- 1). Calculate gross annual income. This is the sum of all the cash flows received. For example, if your rental property produces $2,000 of rent each month, your gross annual income would be $24,000 ($2,000 x 12 months = $24,000).
- 2). Calculate net income before taxes. Subtract all the annual operating expenses from the gross income to get this figure. For example, if the total expenses equal $10,000, your net income before taxes would be $14,000 ($24,000 - $10,000 = $14,000).
- 3). Divide net income before taxes by your initial cash outlay. Multiply the result by 100 to get a percentage. This equals your cash-on-cash return. If you initially put $100,000 into the investment, your cash-on-cash return would be 14 percent ($14,000 / $100,000 = 14 percent).
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