A cash-on-cash return is a rate of return often used in real estate transactions that calculates the cash income earned on the cash invested in a property.

It’s important because it helps property investors determine the best way to finance the purchase of investment properties for the best return on investment.

**Formula to calculate cash on cash return.**

**Example:**

Suppose an investments annual cash flow before tax was $ 100,000 and the total cash that was invested was $ 700,000. Calculate the cash on cash return of the investment.

Thus, the investments cash on cash return is 14.3%.