What is a real estate investment property cash-on-cash return analysis and how can I perform it?

@aidan.jacobs 

A real estate investment property cash-on-cash return analysis is a method used to evaluate the profitability and return on investment (ROI) of a real estate investment. It measures the cash flow generated by an investment property relative to the cash invested, providing an indication of the return an investor can expect on their initial investment.

To perform a cash-on-cash return analysis, you can follow these steps:

1. Calculate Net Operating Income (NOI): Subtract the property's operating expenses (e.g., property taxes, insurance, maintenance costs, vacancy allowance) from the property's gross income (rental income, parking fees).
2. Determine Cash Investment: Consider the total amount of cash invested in the property, including the down payment, closing costs, and any additional expenditures made for improvements or renovations.
3. Calculate Cash Flow After Debt Service: Subtract the property's annual mortgage payments from the NOI to get the cash flow generated by the property.
4. Compute Cash-on-Cash Return: Divide the cash flow after debt service by the cash investment and multiply by 100 to get a percentage. This is the cash-on-cash return.

The formula for cash-on-cash return is: Cash-on-Cash Return = (Cash Flow After Debt Service / Cash Investment) * 100

By performing this analysis, investors can assess the profitability of a real estate investment, compare it to other potential opportunities, and make informed decisions based on the expected return.