The rate of return, for a real estate transaction, that represents the total monetary income (total cash) earned on the monetary amount (total cash) invested in a property. As a metric, this rate relates an investment property’s pre-tax cash flows to the equity investment. For example, it can be calculated as the ratio of the annual return on a property to the amount of mortgage paid in a corresponding year.

Equity capitalization rate = equity investment ÷ before-tax cash flow

Equity capitalization rate (also known as cash-on-cash return, equity dividend rate, CoC return or cash yield) is an annual measure of a real estate investor’s income from a property (financed by the investor’s equity) related to the amount the investor initially paid to purchase it and prepare it for use.

Equity capitalization rate is one of a number of metrics used by real estate investors to evaluate a property and its current or future profitability.