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What is cash-on-cash vs capitalization rate?
- Cash-on-cash is net profit divided by cash invested (downpayment).
- Capitalization rate is the return on your capital investment - the profit divided by the total cost of the property.
- Example: If you made a $100k downpayment on a $500k house and made $10k in profit, your cash-on-cash rate is 10% and your capitalization rate is 2%.