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Adj Cash on Cash article

How is the Adj Cash on Cash calculated for commercial real estate investments and developments? What are the factors that the Adj Cash on Cash takes into consideration when shown in a proforma income statement, and what is ignored? Why is the Adj Cash on Cash useful for investment real estate? These are the questions that are explored using the Proforma Example in this article.

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Video Title: Learn about the Adj Cash on Cash

Video Publication_Date: Friday, March 24, 2017

Video Duration: 2:42

Video Description:
The topic for this commercial real estate investment analysis video is Adj Cash on Cash. Throughout the video planEASe Software is used to illustrate Adj Cash on Cash. The video does not use the current Proforma Example, but all the factors that the Adj Cash on Cash are sensitive to are covered.

Downpayment = $1,023,344
Total Gross Income$365,472$372,443$370,410$376,040$384,217$414,321
Less: Vacancy & Credit Loss19,0843,20214,6205,0493,50150,321
Effective Income$346,387$369,241$355,790$370,992$380,717$364,000
Total Operating Expenses$69,400$71,244$73,141$75,094$77,103$79,170
Net Operating Income$276,987$297,997$282,649$295,898$303,614$284,830
Total Debt Service$230,823$230,823$230,823$230,823$230,823$230,823
Net Operating Cash Flow$46,164$67,174$51,826$65,075$72,791$54,007
Cash on Cash Before Tax4.51%6.56%5.06%6.36%7.11%5.28%

In this case the 2010 Cash-on-Cash was calculated by:

2010 Net Operating Income (NOI)$46,164
divide by the Downpayment$1,023,344
equals the 2010 Cash-on-Cash4.51%

  • Down Payment, Scheduled Income (Current Year Only), Debt Payment (Current Year Only), Vacancies (Current Year Only), Expenses (Current Year Only), Capital (Development) Spending (from Previous Years), and Additional Investments and Dispositions (from Previous Years)
Ignores:Why is Adjusted Cash on Cash useful?

If you are a developer you can think of the Adjusted Cash on Cash as a Developer's Cash on Cash. If you are looking at an investment that is a development, rehab, or has major vacancies that need to be leased up, the traditional Cash on Cash might not give you a valid perspective. Using the Adjusted Cash on Cash for a year that has a stabilized Net Operating Cash Flow typically yields a better number. This is what the Adjusted Cash on Cash is designed for. It can be looked at in years beyond the first year, and it adds any additional spending items to the price. Some of those spending items might include tenant improvements, commissions, rehab construction items, development construction items, and so on. It also takes into account any partial sales and refinancing.

What is the Adjusted Cash on Cash Sensitive to:

Price, Expenses, and Revenue Items (Rent Increase/Decrease, Vacancy, Reimbursements, Free Rent), Tenant Improvements, Commissions, Rehab Construction Items, Development Construction Items, Partial Sales and Refinancing

The Adjusted Cash on Cash is shown in these planEASe Reports:

Written by
Michael Feakins, CCIM
of planEASe Software