At a Meetup the other night with other like-minded real estate investors, we got to talking returns on investment. Sometimes, we get to talking in jargon and sometimes we forget that everyone doesn’t have all of the definitions down pat, or they may have forgotten them entirely. I was going to re-create an article addressing the question of cash-on-cash returns vs. internal rate of return (IRR), but why do that when James Miller did such an outstanding job making this complicated topic easy to understand? Enjoy!
Cash on Cash Return vs. Internal Rate of Return
by James Miller
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Cash on Cash
Cash in Cash return, or Return on Investment (ROI) is the easiest Rate of return to calculate. It is also the one I use the most often as it tells me what the money is generating with regard to actual cash I can put in my pocket today.
To calculate it you take the amount you are getting from an investment, typically on an annual basis, and divide it by the amount you have invested. Multiply this number By 100 and you have a percentage representing Cash on Cash Return.
For example if I have $10,000 in a property that is netting $100 per month, I am getting $1200 per year on my $10,000.
I divide the $1200 by $10,000 to get .12 I multiply this number by 100 to get my percentage of…
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CREtirement 