Money-on-Money return, usually abbreviated as CTC, is a metric used to judge the profitability of an actual property funding. It represents the ratio of annual before-tax money movement to the entire amount of money invested. For instance, if an funding property generates $10,000 in annual money movement after bills and the preliminary money funding was $100,000, the cash-on-cash return is 10%.
This return is effective as a result of it supplies a transparent understanding of the speedy return on capital. It simplifies the method of evaluating potential investments, particularly when totally different properties require various ranges of financing and preliminary outlay. Traditionally, it has been a cornerstone metric for particular person buyers looking for predictable revenue streams from their actual property holdings. It is significantly related when assessing the influence of leverage on funding efficiency.
