◈ GLOSSARY · REAL ESTATE
Cash-on-Cash Return.
A definition, in plain English — with the books that teach it.
Reviewed by ClearValue Editorial Team · Jun 27, 2026
◈ DEFINITION
What it means
Definition
Cash-on-cash return is annual pre-tax cash flow divided by the actual cash you put into a deal. Unlike cap rate, it accounts for financing — so it shows what your down payment is actually earning. The honest caveat: it ignores principal paydown, appreciation, and tax benefits, so it understates total return on a leveraged property.
◈ IN PRACTICE
Example
You buy a $300,000 rental with $75,000 down. After mortgage, taxes, insurance, and vacancy, it cash-flows $6,000/year. Cash-on-cash = $6,000 / $75,000 = 8%.
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