Cash Flow Return on Equity

Annual cash flow as a percentage of current equity.

Example Result

Sample Data

-5.51%

Based on a sample $385,000 property with $2,850/month rent, 20% down, 7% interest rate.

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Cash Flow Return on Equity Formula

Annual Cash Flow / Current Equity x 100

-$4,246 / $77,000 x 100

-5.51%

What This Means

A sample property priced at $385,000 with $2,850/month rent has a cash flow return on equity of -5.51%. This tells you if your equity is generating efficient cash returns. If cash flow ROE drops below what you could earn elsewhere, it might be time to refinance (pull equity out) or sell and redeploy capital into a higher-returning property. This is a key metric for portfolio optimization.

Where This Value Comes From

Cash Flow Return on Equity is not entered directly — it is calculated from Cash Flow Before Tax and Total Equity Current. See the formula breakdown above and the detailed inputs below.

Calculated From

Cash Flow Return on Equity is calculated using these inputs:

Cash Flow Before Tax

Cash remaining after operating expenses and debt service.

-$4,246

Total Equity Current

Current equity position (property value minus loan balance).

$77,000

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Why It Matters

This tells you if your equity is generating efficient cash returns. If cash flow ROE drops below what you could earn elsewhere, it might be time to refinance (pull equity out) or sell and redeploy capital into a higher-returning property. This is a key metric for portfolio optimization.

Detailed Explanation

Cash Flow Return on Equity measures your annual cash flow (before taxes) relative to the equity you currently have in the property. As equity grows through appreciation and paydown, this return naturally declines unless rents grow proportionally.

Discussion

This metric is sometimes called "Levered Yield" in finance and real estate literature. The name highlights that this return reflects the effect of leverage (your mortgage) on cash flow — you are measuring cash flow against equity, not against the full property value.

Comparing Cash Flow Return on Equity (levered yield) to Unlevered Yield (NOI ÷ Property Value) reveals whether leverage is helping or hurting your returns:

• Positive leverage: Cash Flow ROE > Unlevered Yield — your mortgage is amplifying returns because the property earns more than the debt costs.
• Negative leverage: Cash Flow ROE < Unlevered Yield — debt service is consuming more than the financing generates, dragging down your cash-on-equity return.

This comparison is one of the most important leverage diagnostics in real estate investing.