I frequently get asked about the different ways you can measure success as it relates to investing. One that comes up all the time is, “What is cash-on-cash return?” In this blog post, I’m going to tell you the answer!

Hey there, it’s Billy with KeePon Cashflow. Once again, I’m going to continue to share tips and strategies that will help you make more money. They’re going to help you have more control over your free time and ultimately live with less stress. If it’s your first time here, why don’t you subscribe to the channel and leave a question or comment below. You can also check out any related links at the end.
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As for today, I want to come back to the question of what is cash on cash return?

I get questions like this quite frequently, and I think most of you know that I enjoy interactions across our different channels, and specifically on Facebook and YouTube. I like to do a lot of live interactions because it really opens up the opportunity for a lot of different questions. Like I said the other day in a video, I was doing some reading and looking through a couple of higher-level concepts thanks to one of the questions that came up from one of the members in the community. It helped me better understand what they were talking about, and at a higher level. Another question that came about as a result was really specific, and it centered around cash-on-cash return.
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This question came from Juliet, who is frequently on our Facebook fan page, as a number of you are in addition to being on our YouTube channel. She asked what cash-on-cash return was, so I thought I’d take the time to give a simple, easy answer that breaks the question down and provides a concrete example to understand all the specifics of cash-on-cash return as it relates to any investment. I particularly like to invest in cash flow assets, and real estate specifically. For this, I used a simple example so it would be easy to understand.

To start off with, one of the financial metrics when you’re looking at measuring your success from a real estate or investment perspective is cash-on-cash return. Basically, this means you’re looking at the cashflow you’re receiving and comparing it to your costs, such as the purchase of the property. You can go into the weeds here and discuss figures before taxes and after taxes, but it’s essentially the cashflow you’re receiving against the cash investment you’re making.

Let’s look at the cashflow you’ll have over the course of a year. For this example, we’ll use $12,000 in cashflow. The currency doesn’t matter – you can change it to whatever you use. When you’re looking at cash-on-cash return, you’ll need to make note of the money you invested. In this case, let’s say it’s $120,000. That’s your initial invested capital.

To figure out your cash-on-cash return, you need to divide your cashflow by your initial investment, and then multiply that by 100 to create a percentage.  – Tweet  

To figure out your cash-on-cash return, you need to divide your cashflow by your initial investment, and then multiply that by 100 to create a percentage. In this case, we’re dividing $12,000 (cashflow) by $120,000 (investment), which equals 0.10. When we multiply that by 100, we get 10. This means our cash-on-cash return is 10%. The question now is whether that’s good or bad. But it just depends, right? It depends on what you’re looking to have your capital do for you and what your specific situation is.I hope that example made sense and made you feel more comfortable with cash-on-cash return. If you have any further questions about cash-on-cash return or any other questions about other topics, make sure you join us on Facebook or YouTube and leave a comment. I appreciate you taking the time, and I’ll try to get to as many questions as I can. Please feel free to also leave a comment on this blog post.
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For those who are interested, I work in multinational real estate and invest in cashflow assets back in the United States while living in Europe. I’ve written an eBook with step-by-step instructions that breaks all this down. You can pick it up at keeponcashflow.com/roadmap. Once again, if you liked the information here, please leave a comment and share the post! Thanks so much. This is Billy Keels. That’s my two cents for today. As always, hasta la próxima.

You can also check out my latest podcasts and collaborations here keeponcashflow.com/podcasts/