Cash on Cash Return in Real Estate

Cash on cash return is in fact equity dividend rate. It is a ratio between annual cash flow before taxes and the total initial investment, expressed as a percentage. It is not an exact measurement of an investment, because it does not take in account the future value of money. However if it is used with the expected cash flow of the first year of ownership, it can at least give a first idea about the investment and an easy comparison to other types of investments, but definitely it should not be the main comparison measurement, as it is presented in many popular investment publications.

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