Cash on Cash Return Calculator
Calculate the cash on cash return for your real estate investments. Analyze your actual cash yield, monthly cash flow, and compare multiple properties to find the best investment opportunities.
Purchase & Investment
Enter property purchase details
Rental Income
Enter expected rental income
Operating Expenses
Investment Metrics
What is Cash on Cash Return?
Cash on Cash Return (CoC) is one of the most important metrics for real estate investors because it measures the actual return on the cash you have invested, not the total property value. Unlike cap rate, CoC accounts for your financing and shows you the true yield on your out-of-pocket investment.
Cash on Cash Formula
Example: $8,000 annual cash flow / $80,000 invested = 10% cash on cash return
Cash on Cash vs Cap Rate
Cash on Cash Return
- What it measures: Return on YOUR cash invested
- Includes: Mortgage payments (debt service)
- Best for: Evaluating leveraged investments
- Formula: Cash Flow / Cash Invested
- Typical range: 8-12% is considered good
Cap Rate
- What it measures: Return on total property value
- Excludes: Financing (unlevered return)
- Best for: Comparing properties regardless of financing
- Formula: NOI / Property Value
- Typical range: 4-10% depending on market
Key insight: You can have a low cap rate property with a high cash on cash return by using leverage (financing). This is why experienced investors look at both metrics.
Understanding the Components
Total Cash Invested
All the cash you put into the deal upfront:
- + Down payment
- + Closing costs
- + Rehab/repair costs
- + Initial reserves (if applicable)
- = Total Cash Invested
Annual Cash Flow
The money left over after all expenses:
- + Gross rental income
- - Vacancy losses
- - Operating expenses
- - Mortgage payments
- = Annual Cash Flow
What is a Good Cash on Cash Return?
Poor
Below savings account rates. May indicate overleveraged or overpriced property.
Acceptable
May work if there is strong appreciation potential or value-add opportunity.
Good
Solid returns with reasonable risk. This is what most investors target.
Excellent
Great returns, but verify the numbers and assess higher risk factors.
Remember: Higher returns often come with higher risk. A 15%+ CoC might indicate a challenging location, property condition issues, or unrealistic rent assumptions. Always verify the numbers and inspect thoroughly.
The Power of Leverage
One of the main reasons real estate investors use financing is to amplify returns. Here is how leverage affects your cash on cash return:
| Scenario | Cash Invested | Annual Cash Flow | CoC Return |
|---|---|---|---|
| All Cash ($300K) | $300,000 | $24,000 | 8.0% |
| 25% Down | $75,000 | $9,600 | 12.8% |
| 20% Down | $60,000 | $7,200 | 12.0% |
Note: Higher leverage increases both potential returns AND risk. Lower cash flow margins mean less buffer for unexpected expenses or vacancies.
How to Improve Your Cash on Cash Return
1. Reduce Cash Invested
Negotiate lower purchase price, use seller financing, or find lower closing cost lenders to reduce your upfront investment.
2. Increase Rental Income
Add units, increase rents to market rate, or add income streams like parking, storage, or laundry facilities.
3. Reduce Operating Expenses
Shop for better insurance rates, appeal property taxes, or improve efficiency to reduce ongoing costs.
4. Optimize Financing
Find lower interest rates, use interest-only periods, or extend loan terms to reduce monthly mortgage payments.
5. Minimize Vacancy
Quality tenant screening, competitive pricing, and responsive property management reduce turnover and vacancy losses.
6. Value-Add Improvements
Strategic renovations that increase rent potential can significantly boost your ongoing returns.
Frequently Asked Questions
Does cash on cash return include appreciation?
No, cash on cash return only measures annual cash flow against your cash investment. It does not include property appreciation, principal paydown, or tax benefits. For total return, you need to calculate the Internal Rate of Return (IRR) which includes all these factors.
Why is my cash on cash return higher than my cap rate?
This happens when you use leverage (financing) effectively. If your mortgage interest rate is lower than the property cap rate, leverage amplifies your returns. This is called positive leverage. If the opposite occurs, you have negative leverage.
What expenses should I include in operating expenses?
Include: property taxes, insurance, property management, maintenance/repairs, utilities (if owner-paid), HOA fees, and reserves for capital expenditures. Do NOT include mortgage payments - those are calculated separately as debt service.
Should I include rehab costs in my cash invested?
Yes, any cash you spend before the property generates income should be included: down payment, closing costs, rehab costs, and any initial reserves. This gives you an accurate picture of your true return on invested capital.
How often should I recalculate my cash on cash return?
Recalculate annually or when significant changes occur (rent increases, refinancing, major repairs). Note that CoC return typically improves over time as rents increase while your mortgage payment stays fixed (with a fixed-rate loan).