Cash on cash return is probably the most popular metric to use when calculating the viability of a new rental property investment. Why? Not only is cash on cash return super easy to calculate, but it also gives investors a good overview of what their realized return will be. But what about the unrealized return? We’re talking about all the equity that’s sitting in your property, just waiting to be used to make more money.
If you’re solely factoring in the cash flow of your rental properties, you’re missing a much bigger piece of the pie. This is exactly what Dave Meyer, VP of Data and Analytics at BiggerPockets, found out a few years after he started investing. Dave was smart enough to buy shortly after the housing crash of 2008, but unfortunately, he missed out on years worth of reinvesting he could have been doing, thanks to the equity growth in his rental properties.
Now, Dave uses a not-so-new metric to calculate what the true return on his investment would be, so he can multiply his dollar many times further. If you’re looking to scale your real estate portfolio faster (and smarter), stop using cash on cash return, and try using this instead!
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Check out Last Week’s Episode on The 2022 Housing Market:
How to Maximize Cash Flow with a Cash-Out Refinance:
Evaluating Cash Flow vs. Equity in Today’s Wild Market:
How to Calculate Cash-on-Cash Return (Made Easy!):
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00:00 What’s Better Than Cash on Cash Return?
01:29 Dave’s Favorite Money Metric
02:45 A Cash on Cash Return Example
05:25 A Return on Equity Example
09:42 Using Your Equity to Scale Faster