Simple Interest

Simple interest is interest charged or earned only on the original principal, never on accumulated interest. Cash on cash return behaves like a simple rate: annual cash flow over cash invested, one year at a time, with no reinvestment built in.

At 6.3% simple, $150,000 invested returns $9,512 a year, and five years of that is about $47,560 no matter what you did with the checks. A compound rate of 6.3% over the same five years would produce more, because each year's return would start earning too.

Some private and hard money lenders quote simple interest on short loans, often paid interest only each month. For an investor that makes the payment easy to predict: principal times the annual rate, divided by twelve. The payment then drops straight into the debt service line of the calculator.

Further reading: Simple Interest on Wikipedia.