Credit gives the word to pay either by repaying it or returning those resources later. In other words, this credit is the method of making the reciprocity formal, legally enforceable, and of course, extensible to a vast group of people who are not related.
However, the resources provided may be financial or have goods or services, like consumer credit. The credit covers any form of deferred payment. Credit generally gets extended by the creditor, the debtor or lender, and sometimes the borrower.
While cash-on-cash return might be an easy concept for agents and lawyers, it can sometimes confuse the investor. To get an idea of what it actually means, here are some known definitions of the same:
I. Cash-on-cash return is used to measure how much return the investors are getting from a particular real estate property, in comparison to the invested in it. it is calculated on an yearly basis, instead of the whole life span of the property.
II. Cash-on-cash return is a comparative way of calculating the rate of return on a particular real estate property. Essentially the amount of cash invested in the property is compared to the kind of returns the property is giving.
There are a number of uses you can get from using cash-on-cash returns as a metric. This is an especially good measure for investor in the real estate industry. Some of the more common ways cash-on-cash return can help include:
1. Judging the worth of investment:
For most real estate investors, the main thing that concerns them about a property is what kind of returns they can get on it. Whether they sell it off later or rent it out, they want the highest returns as compared to the money they have invested in the said property. With cash-on-cash return you can easily calculate that and understand if a property is worth the investment.
2. Forecast earnings:
Another thing that can be a great use of cash-on-cash return is you can judge if the property you want to invest in will give you the expected returns. This way you can refrain from making any untimely or unwanted investment, where you have more chances of incurring a loss than making a profit. This way you can build a better portfolio as an investor and make sure that you increase your creditworthiness.
