Buying a rental/vacation home and understanding the cash on cash ROI

[Adam Hicks]

Hello,

I'm looking to analyze a beach property in Nicaragua, considering its potential as a rental, vacation, and retirement home. However, I'm having difficulty understanding the Cash on Cash Return on Investment (ROI) for this property.

One challenge I'm facing is that rental income isn't the only cash flow associated with the property. I'm planning to make additional payments to pay off the mortgage faster, and I'm unsure how to account for this in the ROI calculation. These extra payments will only impact the finances for the duration of the mortgage, which is five years.

Any assistance in analyzing and understanding this would be greatly appreciated.