Cash on Cash Return is a percentage which will measure the return on cash invested of an investment or income producing property. It is calculated by dividing before-tax cash flow, or Net Operating Income by the amount of cash invested and is expressed as a percentage.
Because the cash on cash return is based only on before-tax cash flow relative to the amount of cash invested, it cannot take into account an individual investor's tax situation. The calculation does not take into account any appreciation, depreciation, interest, etc. which can also affect the investors bottom line.
