Difference Between ROI & Cash On Cash Return

[Kenneth Lim]

Hi guys, as I am doing my research and studies, I am quite confuse regarding the difference between "Cash Flow" & "Cash On Cash Return". Please correct me if I am wrong. Thank you and below is an example.


Example 1) ROI: I bought a house which cost me $100,000. I loan 90% and down 10%. $10,000 downpayment. Net cash flow is $300 per month. $3,600 net cashflow per year.*** Return On Investment is $3,600/$10,000 = 36%


Example 2) Cash On Cash Return: I bought a house which cost me $100,000. I loan 90% and down 10%. $10,000 downpayment. Net cash flow is $300 per month. $3,600 net cashflow per year. Closing cost is $3,500.*** My Cash On Cash Return = $3,600/$13,500 = 26.67%


Q1) Can I say that ROI means your net cashflow divide by your downpayment only?

Q2) Can I say that cash on cash return is your net cashflow plus the closing cost then divide by downpayment?