What is a good cash-on-cash return?

There is no universal answer, it depends on market, risk and strategy. Many investors compare deals against each other and against alternative uses of the same cash, adjusting for effort and risk.

Why is my all-cash CoC lower than the cap rate?

With no debt, cash flow equals NOI, so CoC = NOI ÷ total cash invested. If you include acquisition costs in cash invested, the denominator is bigger than property value and CoC lands slightly below cap rate.

Does it include principal paydown or appreciation?

No. It is strictly cash income vs cash invested. Total return would add amortization, appreciation and tax effects, different analyses for different questions.

Rental & Investment · Formula v1.0.0

Cash on Cash Return Calculator

Measure the pre-tax cash yield on the cash you actually put into a deal, the metric income-focused investors track.

Currency (display only)

Your inputs

Total cash invested

Down payment + closing costs + rehab + reserves actually deployed.

Annual rental income

Scheduled or effective annual rent (your choice, be consistent).

Annual operating expenses(optional)

Annual debt service(optional)

Total mortgage payments (P&I) for the year. Use 0 for all-cash deals.

Cash-on-cash return

6.78%

$7,800.00 annual pre-tax cash flow

Total cash invested: $115,000
Annual rental income: $34,800
Annual operating expenses: -$11,800
Annual debt service: -$15,200
Annual pre-tax cash flow: $7,800.00
Monthly cash flow (avg): $650.00
Cash-on-cash return: 6.78%

How the Cash on Cash Return works

Cash-on-cash return measures the annual pre-tax cash a property produces relative to the cash you personally invested, not the full property value.

It is the favorite quick metric of income-focused investors because it answers: 'if I pull $115,000 out of the bank and put it in this deal, what cash does it spit out each year?'

Because it is pre-tax and first-year, investors typically compare it to other deals in the same market rather than to a universal benchmark.

Formula & terms

Cash-on-Cash Return = (Annual Pre-Tax Cash Flow ÷ Total Cash Invested) × 100

Annual pre-tax cash flow: Rental income − operating expenses − annual debt service.

Total cash invested: Everything you paid out of pocket to make the deal work: down payment, closing costs, rehab, reserves.

Worked example

You invest $115,000 all-in on a rental earning $34,800 rent, with $11,800 expenses and $15,200 of mortgage payments.

Pre-tax cash flow = 34,800 − 11,800 − 15,200 = $7,800/year (about $650/month).

Cash-on-cash return = 7,800 ÷ 115,000 = 6.78%.

Assumptions & limitations

•Pre-tax and first-year only; ignores loan amortization, appreciation and capital expenditures.
•Sensitive to whether you enter scheduled vs effective (vacancy-adjusted) rent.

Formula reference

Cash-on-Cash Return = (Annual Pre-Tax Cash Flow ÷ Total Cash Invested) × 100

Annual pre-tax cash flow, Rental income − operating expenses − annual debt service.
Total cash invested, Everything you paid out of pocket to make the deal work: down payment, closing costs, rehab, reserves.

Keep learning

Cash-on-Cash Return: The Income Investor's Compass

Related glossary terms

cash on cash return cash flow debt service