How can cash-on-cash return best be described?

Cash-on-cash return is best described as the ratio of annual cash flow to investment. This financial metric evaluates the return on an investment property by comparing the cash income earned annually to the initial cash investment made. In practical terms, it is calculated by taking the pretax cash flow generated by the property and dividing it by the total amount of cash invested, usually expressed as a percentage.

This measure is particularly useful for real estate investors as it provides insight into the efficiency of their cash investment and helps them assess the performance of their property in generating liquid cash flow. By focusing on the actual cash return relative to the cash invested rather than the total value of the property or other factors, investors can make informed decisions about where to allocate their resources to maximize their financial returns.