Cash on Cash Return vs Equity Multiple and MOIC

No, cash on cash return is not the same as MOIC, and it is not the same as equity multiple either. Cash on cash return is a yearly rate. Equity multiple and MOIC are totals. A deal summary that quotes 6.3% next to 1.5x is putting one year beside an entire hold, not two views of the same year.

The mix-up has a cause. Some sponsors write “cash on cash multiple” when they mean equity multiple, so the same three words end up attached to a percent on one line and a multiple on the next.

A yearly rate against a total payback

Cash on cash return is annual pre-tax cash flow divided by the cash you invested. One year of income on top, one lump of money on the bottom. It gets quoted as a percent.

Equity multiple is every dollar distributed over the hold divided by every dollar you put in, including the money that comes back at sale. It gets quoted as an x. The cash on cash multiple formula is the same thing: total cash out over total cash in.

There is no time inside a multiple. 1.5x over four years and 1.5x over twelve are the same number and nowhere near the same deal. Filling that gap is the job of internal rate of return, which prices when each dollar arrives instead of only counting how many arrive. The multiple does have one clean reading on its own: income distributions of 1.0x mean you have hit your payback period on rent alone.

How each one is calculated on the same deal

Take the site’s default property. A $500,000 rental at $5,200 a month, $10,000 of rehab, $6,000 in property taxes, $2,400 in insurance. With 25% down at 7.25%, the loan costs $30,698 a year, cash flow is $9,512, and cash invested is $150,000. Cash on cash return is 6.3%.

That 6.3% is everything the yearly number claims. To get a multiple you have to add assumptions the percent never asked for: how long you hold, what happens to rent, and what you net at sale.

Hold five years with cash flow flat. Income distributions total $47,560, or 0.32x on $150,000. On the simple tab, $12,000 of annual cash flow on $150,000 invested is 8%, and five years of that is $60,000, or 0.40x. Neither deal has returned your money from rent.

Then there is the loan. Five years of payments on the $375,000 balance leaves about $354,000 owed, so roughly $21,000 of principal has come off. None of that reaches you until you sell.

Where the multiple actually comes from

Sale price drives the multiple far more than rent does. Nobody knows the exit price, so the honest move is a range. Selling costs run near 6 to 8% of price in most markets once commission and closing are counted, so the rows below use 7%.

Value at year five	Net proceeds after costs and payoff	Total distributions	Equity multiple
No growth, $500,000	about $111,000	$158,650	1.06x
2% a year, $552,000	about $159,500	$207,050	1.38x
3% a year, $580,000	about $185,200	$232,700	1.55x

Same property, same 6.3% cash on cash return in every row. The multiple swings from about 1.06x to about 1.55x on the exit alone. Appreciation is a market question rather than a property question, so read any multiple built on a future sale as the sponsor’s guess about that market.

Why a strong multiple can hide weak yearly income

Start from the same $500,000 property and drop the rent to $4,200 a month, which is realistic in a softer submarket. Income falls about $12,000 a year, cash flow turns negative at roughly minus $2,500, and cash on cash return drops below zero. You are funding the property, not collecting from it.

Run that out five years with 3% yearly appreciation and the multiple still lands near 1.15x. The deal worked. It also took a check every month for five years, and it only worked because the market moved. That is the blind spot in each measure: the multiple says nothing about the holding experience, and the yearly percent says nothing about the exit. The notes on what cash on cash return leaves out cover the yearly side of it.

A multiple is also quiet about how much of itself is real. Cash you have banked and equity still sitting in an unsold building both land in the numerator, and only one of them is money. A dollar five years away is worth less than a dollar now, which is what present value measures and a multiple skips.

Where MOIC and equity multiple differ in practice

In arithmetic, nowhere. Both divide total cash out by total cash in. The differences are convention.

• Vocabulary. MOIC comes from private equity and venture. Equity multiple is the real estate term for the same ratio.
• Fees. MOIC is often quoted gross, at the deal level, before fund fees and promote. The equity multiple in a real estate offering is usually meant as what the investor keeps after those. Ask which one you are reading.
• Marks. MOIC on a live fund includes unrealized value from the manager’s own estimate. After the sale closes, the number is just cash.
• Scope. On a single rental you own yourself there are no fees and no marks, so MOIC, equity multiple and cash on cash multiple are one number.

Which to lead with when you pitch a deal

If the pitch is income, lead with cash on cash return and show the multiple second. Investors who need the money to pay them every year will discount a multiple that rests on a sale assumption.

If the pitch is a value-add or a hold to stabilization, lead with the multiple and a yearly rate side by side. The multiple shows the size of the outcome, and nothing inside it tells the reader how long their cash is tied up.

Either way, print both along with the hold period. A multiple with no years attached is not a return. Return on investment has the same weakness, which is why the comparison of cash on cash return and ROI is the right page to read next if you are still sorting out which percent is which.

Run both on your own deal

The cash on cash return calculator handles the yearly side: cash flow, cash invested, and the return on the default $500,000 rental or on your own numbers. Take the cash flow it reports, multiply by your hold years, add what you expect to net at sale, and divide by cash invested. That is your multiple, built on the same deal instead of a different one.