Скачать или смотреть Cash on Cash Return

Considers: Down Payment, Scheduled Income (Current Year Only), Debt Payment (Current Year Only), Vacancies (Current Year Only), Expenses (Current Year Only)

Ignores: Time Value of Money , Sale Proceeds, Loan Balance repayments, Other Years NOI and Debt Service. ... and a lot of other things

Why is Cash on Cash useful?

Cash on Cash is a very popular ratio in commercial investment real estate, and is typically produced in most investment analysis. I like to think of the Cash on Cash ratio as telling me how much cash I receive on my cash investment. Because the Cash on Cash ratio takes financing into account, the investment used in the calculation is how much the owner had to invest of his own money, and the cash received is the amount less the debt payment, which is the amount the owner actually gets. For this reason the ratio can be really helpful when the owner is looking for an investment that to produce income during the period that it is owned.

A good example might be an investor who has decided to move from one property to another through the exchange process to avoid the capital gain taxes from a sale. In this case, the owner is probably more interested in the amount of yearly income that will be produced by the new property rather than any appreciation (although having both is best). In this case the Cash on Cash ratio is very helpful when comparing alternatives.

However, since the ratio does not take into account the amount of sale proceeds or losses or Time Value of Money', it, in essence, assumes that you receive your exact cash investment back at the end of the investment. This of course is never true. If you did sell your property in one year or any year after the sale price will almost certainly be different (hopefully higher), and there will be costs involved in the sale.

When is Cash on Cash NOT useful?

Cash on Cash is not a Time Value of Money measure, which means you can't compare the Cash on Cash % against the yield on a bank account, the yield on bonds, or IRR's. If you are looking at a property from an owner/user viewpoint the Cash on Cash ratio does not work, because there is no income for the ratio to use. In years following the initial year you might need to adjust the initial investment to account for new loans and additional investments. Try the Adjusted Cash on Cash for an alternative.

What is the Cash on Cash Sensitive to:

Price, Down Payment, Expenses, Scheduled Income (Rent Increase/Decrease, Vacancy, Reimbursements, Free Rent), Loan Amount, and Debt Payment.