Money-on-Money return, usually abbreviated as CTC, is a metric used to guage the profitability of an actual property funding. It represents the ratio of annual before-tax money circulation to the entire amount of money invested. For instance, if an funding property generates $10,000 in annual money circulation 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 offers a transparent understanding of the fast 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 traders in search of predictable earnings streams from their actual property holdings. It is notably related when assessing the affect of leverage on funding efficiency.