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Cash-on-cash return calculator
Cash-on-cash measures what your invested money earns after the mortgage is paid. Enter the deal terms to see annual cash flow, total cash in, and the return on it.
Negative. This property costs you money every month. That can be a deliberate bet on appreciation, but only make it with reserves and a clear thesis.
Cash-on-cash counts cash only. It excludes loan paydown, appreciation, and depreciation benefits.
How cash-on-cash return is calculated
annual cash flow = net operating income − annual debt service
total cash invested = down payment + closing costs + upfront repairs
Unlike cap rate, cash-on-cash is entirely about your position in the deal. It answers a narrow, practical question: for every dollar you put in, how many cents come back this year? That makes it the right number for comparing a rental against an index fund, a CD, or a different property you're also considering.
What belongs in "total cash invested"
- Down payment. The obvious one.
- Closing costs. Loan origination, appraisal, title, escrow, recording, and prepaids. Typically 2 to 5 percent of the purchase price.
- Upfront repairs. Everything you spend before the first tenant moves in.
- Initial reserves, if you want to be strict. Many investors hold six months of expenses aside, and that capital is genuinely committed to the deal.
Why this number moves so much with interest rates
Debt service sits directly in the numerator. On a $319,000 loan, moving from 6% to 7.5% adds roughly $310 a month, which is about $3,700 a year straight out of cash flow. On $121,000 of invested cash, that single change swings cash-on-cash by more than three percentage points. The property didn't change at all. This is why a deal that penciled in 2021 often doesn't now, and why the same building can work again if rates fall.
What counts as a good cash-on-cash return
Judge it against what the same money could earn elsewhere at similar risk, not against a fixed rule.
| Range | Reading |
|---|---|
| Negative | You are paying to own it. Defensible only if you're buying for appreciation or forced equity, and only with reserves to cover it. |
| 0 – 4% | Thin. Treasuries or a money market may beat it with none of the work or risk. |
| 4 – 8% | Reasonable in expensive markets, especially with strong appreciation history. |
| 8 – 12% | The range most buy-and-hold investors target. |
| Over 12% | Strong. Stress-test the rent and expense assumptions before believing it. |
Remember that cash-on-cash understates your total return. It ignores principal paydown, which in year one on a 30-year loan runs roughly 1.2% of the balance, plus appreciation and depreciation deductions. A 6% cash-on-cash deal can produce a low-teens total return once those are counted, but only cash flow pays the bills while you hold it.
Cash-on-cash vs. cap rate vs. ROI
| Metric | Answers | Includes the loan |
|---|---|---|
| Cap rate | Is this asset priced fairly against comparable properties? | No |
| Cash-on-cash | What does my invested cash earn this year? | Yes |
| Total ROI | What did the whole investment return, including equity and appreciation? | Yes |
| DSCR | Does the income cover the mortgage? Lenders usually want 1.20 or higher. | Yes |
Cash-on-cash questions
What is a good cash-on-cash return on a rental property?
Most buy-and-hold investors target 8 to 12 percent, but the right threshold depends on your alternatives. When risk-free yields are near 5 percent, an 8 percent return on an illiquid asset that requires management is a much thinner premium than the same number would have been a decade ago.
Should I include principal paydown in the calculation?
No. Cash-on-cash measures cash in your pocket, and principal reduction is equity rather than cash. Track it separately as part of total return. Mixing them produces a flattering number that doesn't reflect what you can actually spend.
Does a bigger down payment improve cash-on-cash return?
Usually the opposite. More cash down reduces debt service and raises cash flow, but it raises the denominator faster than the numerator. Less leverage typically means lower cash-on-cash and lower risk. That trade-off is the whole decision.
How do I account for a property that needs renovation?
Put the renovation budget in total cash invested and use post-renovation rent as income. Be conservative on both. Renovation costs overrun more often than they come in under, and the rent bump is usually smaller than the contractor's estimate implies.
Is cash-on-cash before or after tax?
Before tax, by convention. Depreciation frequently makes the after-tax figure meaningfully better, since it shelters income without costing cash. Your accountant can model that; this calculator does not.
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Estimates for analysis and educational use only: not financial, investment, tax, or legal advice. Verify every number independently before making a purchase decision.