This calculation allows you to see the return on your initial cash investment less your monthly mortgage payments.
Cash on cash return = (Net annual cash flow/total cash invested) x 100
Cash invested includes any deposit you needed for the mortgage, any additional fees connected to your investment and as any costs for work or refurbishments made to the property.
Net annual cash flow is your annual rental income less your annual mortgage payments.
For example, you invest in £50,000 as a deposit for your buy-to-let mortgage and spend £10,000 in renovations. Your total cash invested in £60,000. You pay £350 per month for your buy-to-let mortgage and receive £860 in rental income. Your net annual cash flow is £6120. Your cash on cash return would be 11.4%.