Cash-on-Cash Return

The cash-on-cash return (CCR) is a measure of the profitability of an investment property. It is calculated by dividing the annual net operating income (NOI) by the initial investment. The NOI is the amount of money left over after all expenses have been paid, including mortgage payments, property taxes, insurance, and maintenance. The initial investment is the total amount of money that you put into the property, including the down payment and closing costs.

The CCR is a useful metric for comparing different investment properties. It can help you to determine which property is likely to provide the best return on your investment. The CCR is also a good way to track the performance of an investment property over time.

There are a few things to keep in mind when using the CCR. First, the CCR only takes into account the cash flow from the property. It does not consider the appreciation of the property, which can also be a significant source of return. Second, the CCR is a static measure. It does not take into account the time value of money. This means that a property with a higher CCR may not necessarily be a better investment than a property with a lower CCR, if the higher CCR is due to a shorter holding period.

Overall, the CCR is a useful tool for evaluating investment properties. However, it is important to use it in conjunction with other metrics, such as the cap rate and the internal rate of return, to get a complete picture of the investment.

Here are some additional things to keep in mind when using the CCR:

* The CCR is not a measure of total return. It only takes into account the cash flow from the property. Other factors, such as appreciation, can also contribute to the return on an investment.
* The CCR is a static measure. It does not take into account the time value of money. This means that a property with a higher CCR may not necessarily be a better investment than a property with a lower CCR, if the higher CCR is due to a shorter holding period.
* The CCR is only one factor to consider when evaluating an investment property. Other factors, such as the cap rate and the internal rate of return, should also be considered.

The CCR can be a helpful tool for comparing different investment properties and tracking the performance of an investment property over time. However, it is important to use it in conjunction with other metrics to get a complete picture of the investment.