Summary
Cash-on-cash return compares year-one cashflow with the cash invested into the deal.
How to apply it when assessing a deal
Use cash-on-cash to understand how hard your deployed cash is working in the early operating period. It is useful for comparing deposit-heavy and highly leveraged structures, but it should be read alongside risk, DSCR and longer-term wealth because a high cash-on-cash figure can be created by aggressive debt.