Cash on Cash Return

Cash on cash return is annual pre-tax cash flow divided by the cash invested. After a BRRRR refinance the denominator is the cash left in the deal, which is why the strategy's headline result is often a very high or infinite return: the property pays a positive cash flow on little or none of your money.

On the default deal, $1,237 of annual cash flow on $16,675 left in is a 7.4% return. Had the ARV been $283,000 instead of $260,000, nothing would be left in and the return would be infinite. The same property bought turnkey with 25% down returns 1.7% on $72,800.

An infinite return describes a position, not a rate. It exists only if the cash flow is positive; a property that returned all the cash and loses $150 a month has no return at all, just a cost. Judge a BRRRR on both numbers: how much cash came back, and what the rental earns on the new loan.

Further reading: Cash on Cash Return on Wikipedia.