We're currently looking for a 2nd long-term rental property. As we evaluate different homes that come on the market, one of the metrics we look at is the cash-on-cash return. This estimates our returns based off estimated cash flow and initial out of pocket expenses.

Ideally, we'd love to see 8-10%+ returns, but in this market, those are few and far between. So we're looking at up and coming neighborhoods and potentially out of state, which would hopefully see alot of appreciation in the next few years. But it does give us a quick high level review of potential profits and if the profits warrant the cost.

This metric does have some flaws with it. It doesn't factor in taxes you have to pay on the income, so keep in mind that is technically another expense. It also doesn't factor in equity and appreciation. So, while in the short-term a deal may not look great, in the long-term, it may be a winner.