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Simple Cash on Cash Look Up Chart
Sometimes you want a quick reference chart for determining what return you will achieve for a particular property. The below chart is a very simplistic chart which shows the cash on cash return for various assumed net purchase yields and loan to value ratios.
Key assumptions in the chart:
- Purchase costs of 5% of the acquisition price.
- Borrowing at the Loan to Value Ratio shown.
- Interest only loan at 6%
- Free cash flow is simply the net income less interest expense (no capital expenditure, depreciation allowances, vacancies etc).
- Cash on cash return includes the total upfront capital costs (acquisition costs plus deposit).
How to use the chart?
- Example 1: Say you want to buy a property with a 7% net return and you want to use 80% leverage. This chart says that your first year cash on cash return is 8.8%.
- Example 2: Say the minimum investment return you want to achieve is 10% and you want to know what yield is required for a 70% loan. This chart shows that you need to purchase a property with a minimum yield of 7.7%.
Should you want a copy of this calculator, reach out to the team at hello@pcba.au.
