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Cash on Cash Returns

Discussion in 'General Property Chat' started by sash, 22nd Apr, 2016.

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  1. sash

    sash Well-Known Member

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    I thought I would share this, as I have been asked by a few people what it is...

    Cash on cash return is opportunity costs when you invest....

    For example...I had somebody tell me they made a 100k on a 500k purchase in Victoria in 2 years. They indicated that they made 20%...really..... lets look at the numbers

    Deposit 50k
    Stamp Duty/Legals approx 30k
    Reno costs 10k

    The total costs sunk into that deal was 80k....so the real return was 20k or 25% on the initial 80k


    By the same token some else I know put 120k regional property and their deposit and reno costs was 15k plus 3k for stamps so 18k in total. The current value is 50k.

    So the real return is 32k or a 170% return.

    I see a lot of people buying places sinking hard cash...but their cash on cash return is very poor.
     
    Nick Valsamis and ashish1137 like this.
  2. Nick Valsamis

    Nick Valsamis Well-Known Member

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    In other words, people don't really consider the actual return on investment which is commonly used to measure the performance of other investments.
     
  3. sash

    sash Well-Known Member

    Joined:
    19th Jun, 2015
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    Sydney
    Yes...Nick that is correct. There is an opportunity cost..otherwise you would leave the money in the bank.