Cash on Cash Return

Cash on cash return is the ratio of a year's pre-tax cash flow to the total cash an investor has tied up in the deal. 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, $1,933 of annual cash flow on $27,600 left in is a 7.0% return. Had the ARV been $538,000 instead of $500,000, nothing would be left in and the return would be infinite. The same property bought turnkey with 25% down returns 1.4% on $140,000.

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.