Cash on Cash

Cash-on-Cash return is a percentage that measures the return on cash invested in an income-producing property. It is calculated by dividing before-tax cash flow by the amount of cash invested.

Cash-on-Cash Return is used to evaluate the profitability of income-producing properties. It only considers before-tax cash flow and doesn't take into account an investor's individual income tax situation and it doesn't consider the wealth-building potential of a property via appreciation.

If before-tax cash flow for an investment property is equal to $10,000 and your cash invested in the property is $100,000, Cash- on-Cash Return is equal to 10%.

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Determine the Real Estate Financial Statistics for a Property

Before you buy an investment property it is critical that you create your own projection of the property's profitability. Real-Estate-Proforma.com has a quick-proforma with which you can calculate real estate financial statistics such as Internal Rate of Return, Capitalization Rate, Cash-on-Cash, Debt Multiplier, Loan-to -Value Ratio, Debt Coverage Ratio, and Mortgage Payments. You can use this JavaScript proforma to project the profitability of a real estate project. By becoming a member you will receive access to a number of Excel real estate proformas. membership | services

If you are analyzing another person's proforma, or you are examining a prospectus for a real estate deal, it is very important that you read the document carefully and determine how the values of the financial statistics above are being calculated. For instance, values such as the Cap Rate may be determined from overly optimistic projections of the future rental income of a property.

You can "reverse engineer" the financial projections you receive from a prospectus and/or request the Excel (or other type of) spreadsheet a developer used to create their proforma. A very useful Excel or Visual Basic macro used to check Excel formulas is available in the spreadsheet below for download. Download Mortgage Formula Excel Spreadsheet

The due-diligence you do on a potential investment may uncover a number of potential problems with a real estate deal and we suggest you research each real estate investment very carefully. There are a variety of real estate financial consultants who can help with this, but if you are like many Real-Estate-Proforma.com members, you can or are learning to do your own due-diligence.

We hope you become a more successful real estate investor by using this site! membership | services