Cash on Cash Rate
cash on cash rate=leverage x (gross income-expenses-mortgage pmt)/price. This measure shows you how much cash flow will be generated by your investment given the amount of cash invested initially. This will linked to the cap rate as follow: cash on cash = leverage x (cap rate-interest rate-addon repayment rate). The addon repayment rate is dependent on mortgage term and interest rate, it is 1/NbYear when rates are 0, but lower when rates increase. For 30Y, the addon repayment rate will go down from 2% to 1.25% for rates in the 3%-7% range. This is a solvency ratio.
This is one of the property key profitability measures.
