What is cash on cash return?

Cash-on-cash return is the annual cash flow from a rental property divided by the total cash you invested (down payment + closing costs + initial repairs). Unlike cap rate, it includes mortgage payments and measures your actual return on out-of-pocket investment.

How is cash on cash calculated?

Calculate annual cash flow (NOI minus annual mortgage payment), then divide by total cash invested. COC = Annual Cash Flow / Cash Invested × 100. Our calculator handles mortgage amortization automatically when you provide rate and term.

What is a good cash on cash return?

Most rental investors target 8%+ cash-on-cash. 12%+ is excellent. 5-8% is fair (acceptable in appreciation markets). Below 5% is poor unless you're betting heavily on appreciation. Negative cash flow only makes sense for speculative plays.

Cash on cash vs cap rate: which is better?

Both — they measure different things. Cap rate is unlevered and lets you compare properties independent of financing. Cash-on-cash is levered and shows your actual investor return. Use cap rate to evaluate the property; use cash-on-cash to evaluate your investment.

How does down payment affect cash on cash?

Smaller down payment = higher leverage = higher COC% (when property cash-flows). But also higher monthly payment, smaller cushion, and more risk. The 'sweet spot' for most investors is 20-30% down — enough equity for safety, low enough leverage to amplify returns.

Should I include rehab costs in cash invested?

Yes — any cash you put in upfront should be in the denominator. This includes down payment, closing costs, inspection, immediate repairs, and any rehab needed before renting. Don't include ongoing maintenance (that's an operating expense).

Does cash on cash include appreciation?

No — COC only measures cash flow returns. Appreciation, principal paydown, and tax benefits are separate. Total return = COC + appreciation + principal paydown + tax benefits. Many investors accept low COC for high appreciation potential.

Why is my cash on cash return negative?

Either rent is too low, expenses are too high, or you put too little down (high mortgage payment exceeds NOI). Solutions: raise rent, reduce expenses, refinance to lower payment, or accept it's a speculation play (betting on appreciation, not income).

Cash on Cash Return Calculator

Cash-on-cash return is the most important metric for leveraged real estate investors. Unlike cap rate (unlevered), cash-on-cash includes your mortgage payment and shows the actual return on the cash you put down. Formula: Annual Cash Flow / Total Cash Invested × 100. A 10% cash-on-cash means for every $100,000 invested, you get $10,000/year in cash flow. Most rental investors target 8%+ cash-on-cash.

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calendar_today Updated: April 2026

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paymentsInvestment

Purchase Price

Down Payment %

Closing Costs

Rehab Costs

Annual Rent

Vacancy %

Annual Op Expenses

Interest Rate %

Loan Term (years)

trending_upReturns

Cash-on-Cash Return

2.98%

Poor (under 5%)

Cash Invested

$85,000

Loan Amount

$225,000

NOI

$20,500

Annual Mortgage

$17,963

Annual Cash Flow

$2,537

Monthly Cash Flow

$211

Input Values

Purchase Price

Down Payment %

Closing Costs

Initial Rehab/Repair Costs

Annual Gross Rent

Vacancy Rate

Annual Operating Expenses

tips_and_updates Tips

• Target 8%+ cash-on-cash return for buy-and-hold rentals
• Higher leverage = higher COC% when cash-flowing, but more risk
• Don't forget closing costs and initial repairs in cash invested
• 5% vacancy is typical; use 7-10% in soft markets
• Operating expenses usually run 30-50% of gross rent
• Negative cash flow can still work if appreciation is strong (speculation)
• Refinancing improves COC by reducing initial cash investment

functions Formula

{Cash-on-Cash = Annual Cash Flow / Total Cash Invested × 100 [{Annual Cash Flow NOI − annual mortgage payment} {Total Cash Invested Down payment + closing costs + initial repairs} {NOI Effective rent − operating expenses (excludes mortgage)}] Cash-on-cash measures the levered return on your actual out-of-pocket investment. It's more relevant than cap rate for individual investors because it accounts for financing. Higher leverage (smaller down payment) generally increases cash-on-cash return when the property cash-flows positively, but also increases risk.}

science Example: $300k property, 25% down, $30k rent, 7% mortgage

$300k × 25% = $75k down + $6k closing + $4k rehab = $85k total cash invested. NOI = $30k rent − $1.5k vacancy − $8k expenses = $20.5k. Mortgage on $225k @ 7% × 30y = $17,963/year. Cash flow = $20,500 − $17,963 = $2,537. COC return = $2,537 / $85,000 = 2.98%. This is below the 8%+ target — consider higher rent, lower price, or larger down payment.

Expected Results

Cash-on-Cash Return 3.0%

Annual Cash Flow $2,537

Total Cash Invested $85,000

Loan Amount $225,000

Net Operating Income $20,500

Annual Mortgage Payment $17,963

How to Use This Calculator

Enter purchase + down payment

Property price and down payment %.

Add closing + rehab

All upfront cash beyond down payment.

Enter annual rent + vacancy

Realistic rent estimate and vacancy assumption.

Set operating expenses

Taxes, insurance, mgmt, repairs (not mortgage).

Set interest rate + term

Mortgage details for cash flow calculation.

Review COC return

Target 8%+ for solid rental investment.

The Formula

Cash-on-cash measures the levered return on your actual out-of-pocket investment. It's more relevant than cap rate for individual investors because it accounts for financing. Higher leverage (smaller down payment) generally increases cash-on-cash return when the property cash-flows positively, but also increases risk.

Cash-on-Cash = Annual Cash Flow / Total Cash Invested × 100

lightbulb Variables Explained

Annual Cash Flow NOI − annual mortgage payment
Total Cash Invested Down payment + closing costs + initial repairs
NOI Effective rent − operating expenses (excludes mortgage)

tips_and_updates Pro Tips

Target 8%+ cash-on-cash return for buy-and-hold rentals

Higher leverage = higher COC% when cash-flowing, but more risk

Don't forget closing costs and initial repairs in cash invested

5% vacancy is typical; use 7-10% in soft markets

Operating expenses usually run 30-50% of gross rent

Negative cash flow can still work if appreciation is strong (speculation)

Refinancing improves COC by reducing initial cash investment

Frequently Asked Questions

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