Understanding Income on Loan Purchase (Cash on Cash Rate)All Cash Purchase

Cash-on-cash return measures the annual return on the cash invested in a property. This is useful when the property is purchased using mortgage loan and the cash invested is less than the total property price.

• Cash Invested = Down payment + Closing Costs
• Gross Income = Monthly Rent × 12
• Expenses = Property Tax + Home Insurance + Maintenance + Vacancy Loss + Property Management
• Net Operating Income (NOI) = Gross Income − Expenses
• Cash flow = NOI − Annual Mortgage Payments
• Cash-on-cash Rate = Cash flow ÷ Cash Invested