Cash-on-Cash Return Calculator
Your actual cash yield on the cash you put in.
Cash-on-cash return
Estimates for planning only, not financial advice.
Cash-on-cash return tells you the yield on the money you actually wired at closing: annual cash flow divided by total cash invested. With $2,000 monthly rent, 8% vacancy, $700 in monthly operating expenses, and a $900 mortgage payment, annual cash flow is $2,880. Against $60,000 invested ($50,000 down plus $10,000 of closing costs and repairs), that is a 4.8% return. This calculator builds both sides honestly, because the metric is only as truthful as the expenses you admit.
How to Use This Calculator
Enter monthly rent at market rates, not the seller\'s pro forma, and a realistic vacancy rate for your area. Operating expenses mean everything except the mortgage: property tax, insurance, maintenance reserve, property management, HOA, and utilities you pay. Enter the full monthly mortgage payment (principal and interest), then the complete cash invested: down payment plus all closing costs plus immediate repairs. The result is your pre-tax cash yield.
Enter rent, vacancy, and every operating expense. Budget maintenance at 1% of property value per year if you lack history.
Enter the mortgage payment and the full cash invested, including closing costs most calculators hide.
Compare the return to your hurdle rate. Under 8%, demand appreciation or a better price. Cross-check the all-cash yield with our cap rate calculator.
The Formula
Notice what is missing: appreciation, principal paydown, and tax benefits. Those are real wealth builders, but cash-on-cash deliberately ignores them to answer the spendable-cash question. A property can show a modest 5% cash-on-cash while building 12% total return through equity growth, and that is fine, as long as you know which number you are looking at. Confusing the two is how investors buy negative-cash-flow properties "for the return."
Worked Example
A $200,000 rental with 25% down: $50,000 down payment, $8,000 closing costs, $2,000 of immediate repairs, $60,000 total cash invested. Monthly rent $2,000 ($24,000 a year) with 8% vacancy leaves $22,080 of effective income. Operating expenses of $700 a month ($8,400 a year) cover tax, insurance, maintenance, and management. Mortgage payment of $900 a month ($10,800 a year) on the $150,000 loan. Annual cash flow: $22,080 - $8,400 - $10,800 = $2,880. Cash-on-cash return: $2,880 / $60,000 = 4.8%. At this return the deal is thin: it needs rent growth or a lower price to clear a typical 8% hurdle.
What Moves the Number
| Change | Effect on cash-on-cash |
|---|---|
| Less money down (more borrowing) | Higher return, higher risk |
| Lower purchase price | Higher: less cash in, same rent |
| Higher rent | Higher, roughly one-for-one on cash flow |
| Understated expenses | Inflated: the classic pro forma trick |
| Cash-out refinance later | Higher on remaining cash, more borrowing |
Borrowing is the amplifier: putting 10% down instead of 25% nearly triples this example\'s return, and also triples the pain if rents slip or rates reset. Underwrite the downside first: run the calculator with 15% vacancy and 20% higher expenses, and confirm the cash flow stays positive. If it does not, the deal only works in good times, which is another way of saying it does not work. For the complete analysis, our rental property calculator models the full financed picture, our cap rate calculator gives the all-cash yield, and our mortgage calculator sizes the payment.
Estimates for planning only, not financial advice.
Frequently Asked Questions
What is cash-on-cash return?
Cash-on-cash return divides a property's annual pre-tax cash flow by the total cash you actually invested: down payment plus closing costs plus initial repairs. Invest $60,000 of cash and net $8,000 a year after all expenses and mortgage payments, and your cash-on-cash return is 13.3%. It answers "what yield am I earning on the money I put in."
What is the cash-on-cash return formula?
Cash-on-cash return = annual pre-tax cash flow / total cash invested. Cash flow is rental income minus vacancy, operating expenses, and mortgage payments (principal and interest). Cash invested is down payment, closing costs, and any immediate rehab. Both numbers must be honest: understated expenses are the classic way this metric gets inflated.
What is a good cash-on-cash return?
Targets vary by market and strategy, but 8% to 12% is the common range investors underwrite for buy-and-hold rentals. Higher usually means more risk, more work, or a cheaper market. Compare against your alternatives: if safe bonds pay 5%, a rental must clear that by a real margin to justify the hassle and illiquidity. Below 6% in most markets, the deal needs appreciation to make sense.
How is cash-on-cash different from cap rate?
Cap rate measures the property without financing: NOI divided by price. Cash-on-cash measures your cash with financing: cash flow after mortgage payments divided by cash invested. A property with a 6% cap rate bought with 25% down at a 7% mortgage rate might show 8% cash-on-cash, because borrowing magnifies the return on your smaller cash base. When mortgage rates exceed the cap rate, borrowing works in reverse.
Does cash-on-cash return include appreciation?
No. It measures cash yield only: rent minus costs, over cash in. Appreciation, loan paydown (equity buildup), and tax benefits are real returns too, but they are not cash in your pocket this year. Total return adds all four wealth-building components; cash-on-cash isolates the one you can spend. Evaluate deals on total return, but never buy a deal whose cash-on-cash cannot survive a vacancy.
Should I include closing costs in cash invested?
Yes, always. Closing costs, lender fees, and initial repairs are cash that left your account and must earn a return. A $50,000 down payment with $8,000 of closing costs and $2,000 of immediate repairs is $60,000 invested, not $50,000. Excluding them inflates the return by 20% in this example, which is exactly how mediocre deals get sold as great ones.
Is cash-on-cash return before or after tax?
Conventionally before tax, using pre-tax cash flow. After-tax return is more accurate for your personal decision but depends on your tax bracket, depreciation, and passive-loss rules, so the industry quotes pre-tax for comparability. If you want the after-tax number, subtract estimated taxes from the cash flow; depreciation often makes the after-tax figure higher, not lower.
How does vacancy affect cash-on-cash return?
Brutally, because most costs are fixed. Model vacancy explicitly: 8% vacancy on $24,000 of gross rent removes $1,920 of income while the mortgage, tax, and insurance stay put. On thin cash flow, one bad vacancy year can take the return negative. Underwrite with realistic local vacancy, not the seller's optimistic pro forma.
Can cash-on-cash return change over time?
Yes, usually upward. Rents rise while the mortgage payment stays fixed, so cash flow grows against a constant invested base. A deal starting at 8% can reach 12% in five years on rent growth alone. Refinance events reset the math: pulling cash out raises the return on the remaining invested cash but adds debt risk. Track it yearly, not just at purchase.
What is the difference between cash-on-cash and IRR?
Cash-on-cash is a single-year snapshot: this year's cash over cash in. IRR is the annualized return over the whole hold period, including the eventual sale, appreciation, and the time value of money. IRR is the better decision metric for comparing holds of different lengths; cash-on-cash is the better gut-check for "does this property pay me to own it." Use both.