This cash-on-cash return calculator shows the yearly return on the cash you actually invest in a rental property, after mortgage payments. It also works out your mortgage payment, net operating income, cash flow and cap rate.
What is cash-on-cash return?
Cash-on-cash return compares the property’s yearly pre-tax cash flow with the total cash you put in: down payment, closing costs and any repair or renovation costs. Unlike cap rate, it includes the effect of your mortgage, so it shows how hard your own money is working.
Cash-on-cash return formula
Cash-on-cash return = yearly cash flow ÷ total cash invested × 100
Yearly cash flow = net operating income − yearly mortgage payments
Worked example
You buy a property for $250,000 with a $50,000 down payment and $7,500 in closing costs, so you invest $57,500. Rent is $2,500 a month; with 5% vacancy, effective income is $28,500. Operating expenses are $7,200, so NOI is $21,300. A $200,000 loan at 7% over 30 years costs about $1,330.60 a month, or $15,967 a year. Cash flow is about $5,333, and cash-on-cash return is about 9.27%.
Frequently asked questions
What is a good cash-on-cash return?
Investors’ targets differ depending on market, risk and how much work the property needs. Compare the result with what your cash could earn elsewhere at similar risk.
Does cash-on-cash return include appreciation or loan paydown?
No. It only counts cash flow. Rising property value and the principal you repay each month add to your total return but are not part of this figure.
Cash-on-cash return vs cap rate: which should I use?
Use cap rate to compare properties on their own merits, and cash-on-cash return to judge a specific deal with your financing. The cap rate calculator covers the first.
For education only, not financial advice.