Commercial Real Estate (CRE) Investor Question #80: Mary has saved $100k for her first real estate investment. Her aim is to add a passive source of income, in addition to her corporate salary. She is considering an equity investment in a syndicated multi-family deal that produces 7% Cash on Cash in Year 1. How much monthly income can she expect in Year 1?
We’ve seen in earlier posts that Cash-on-Cash return indicates the percentage of your investment you’ll get back, on an annual basis. It is the before-tax cash flow (i.e. Cash Flow after Financing) of an investment in a given period divided by the equity invested as of the end of that period.
- Equity Invested = $100,000
- Cash-on-Cash Return = 7%
- Annual Income = 7% x $100,000 = $7,000
- Monthly Income = $7,000/12 = $583
Mary can expect $583 monthly if the deal is executed as planned.