U.S. rental properties
Cash-on-cash return calculator
Cash-on-cash return is a rental property’s annual pre-tax cash flow divided by the cash you put into the purchase: the down payment, closing costs and any repairs or other costs paid at the start. It measures the first-year yield on your own money after the mortgage payment. This calculator also shows what the same property would return if bought with cash, so you can see whether the loan raises or lowers your return.
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Calculator
Calculate your cash-on-cash return
The calculator starts with the worked example below. Replace each value with the numbers for the property you are evaluating, and enter every operating cost as one monthly total.
Results
Cash-on-cash return 8.00%. Annual cash flow $4,400.50. Cash invested $55,000.00.
- Cash-on-cash return
- 8.00%
- Annual cash flow
- $4,400.50
- Monthly cash flow
- $366.71
- Total cash invested
- $55,000.00
- NOI per year
- $14,640.00
- Mortgage payment (P&I)
- $853.29
- All-cash return (no loan)
- 7.71%
- Loan constant
- 7.58%
- Leverage effect
- +0.29 pts
- the loan raises the return
- Payback period
- 12.5 years
See the cash invested and the annual cash flow
| Line | Amount |
|---|---|
| Down payment | $45,000.00 |
| Closing costs | $5,400.00 |
| Repairs and other upfront costs | $4,600.00 |
| Total cash invested | $55,000.00 |
| Rent after vacancy, per year | $22,800.00 |
| Operating expenses, per year | −$8,160.00 |
| Net operating income (NOI) | $14,640.00 |
| Loan payments, per year | −$10,239.50 |
| Annual cash flow | $4,400.50 |
Educational estimate based only on your inputs; not financial advice. Nothing you type leaves your browser.
Formula
The cash-on-cash formula, step by step
The calculator follows the property analysis in the MyInversorAI app, which also counts $1,500 of inspection, appraisal and loan fees in cash invested; enter them under repairs and other upfront costs to match it. Cash flow is before income taxes, and cash invested counts every dollar you pay at the start.
- Total cash invested
Cash invested = down payment + closing costs + repairs and other upfront costsLeaving out closing costs or the repairs needed before the first tenant makes the return look higher than it is.
- Mortgage payment (principal and interest)
P&I = L × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)L is the loan (price minus down payment), r is the annual rate ÷ 12 and n is the number of monthly payments. Taxes and insurance belong in operating expenses.
- Net operating income (NOI)
NOI = rent × 12 × (1 − vacancy %) − operating expenses × 12Income after vacancy and running costs, before the loan.
- Annual cash flow
Cash flow = NOI − P&I × 12What is left for you each year after the loan payments, before income taxes.
- Cash-on-cash return
CoC = annual cash flow ÷ total cash investedThe first-year, pre-tax return on your cash. It is negative when the property needs money from you each year.
- All-cash return (yield on total cost)
All-cash return = NOI ÷ (price + closing costs + upfront costs)The cash-on-cash return the same purchase would earn with no loan. The MyInversorAI app calls it yield on cost.
- Loan constant
Loan constant = P&I × 12 ÷ loan amountThe yearly cost of each borrowed dollar, principal included. It depends on the rate and the term.
- Leverage effect
Leverage effect = cash-on-cash return − all-cash returnPositive when the all-cash return is higher than the loan constant: the loan raises your return. Negative when it is lower: the loan lowers it.
- Payback period
Payback = total cash invested ÷ annual cash flowYears of cash flow at today’s level to get your cash back, ignoring rent growth, loan paydown and a sale. Not shown when cash flow is zero or negative.
Worked example
Worked example: a $180,000 single-family rental
These are the calculator’s starting values, set in a market where rents are high relative to prices. They are planning assumptions chosen to illustrate the math, not a forecast, a rate quote or a market recommendation.
Assumptions
- Purchase price
- $180,000
- Down payment
- 25% ($45,000)
- Closing costs
- 3% of the price ($5,400)
- Repairs before renting
- $4,600
- Loan
- $135,000 at 6.5% fixed for 30 years
- Monthly rent
- $2,000 per month
- Vacancy
- 5% of rent
- Operating expenses
- $680 per month: $200 tax, $120 insurance, $100 repairs, $100 CapEx, $160 management
Step by step
| Step | Calculation | Result |
|---|---|---|
| Total cash invested | $45,000 down + $5,400 closing + $4,600 repairs | $55,000 |
| Loan payment (P&I) | $135,000 at 6.5% for 360 months | $853.29 per month ($10,239.50 per year) |
| Net operating income (NOI) | $2,000 × 12 × (1 − 5%) − $680 × 12 | $14,640 per year |
| Annual cash flow | $14,640 − $10,239.50 | $4,400.50 ($366.71 per month) |
| Cash-on-cash return | $4,400.50 ÷ $55,000 | 8.00% |
| All-cash return | $14,640 ÷ ($180,000 + $5,400 + $4,600) | 7.71% |
| Loan constant | $10,239.50 ÷ $135,000 | 7.58% |
| Leverage effect | 8.00% − 7.71% | +0.29 points |
| Payback period | $55,000 ÷ $4,400.50 | 12.5 years |
| The same deal at 7.5% | P&I $943.94 per month; cash flow $3,312.72 per year | 6.02% (−1.69 points) |
With these assumptions, the $55,000 you put in returns $4,400.50 in the first year, a cash-on-cash return of 8.00%. Bought with cash, the same property would return 7.71% on its total cost. Because that all-cash return is higher than the 7.58% loan constant, the loan adds 0.29 points to your return. The margin is thin: at a 7.5% rate the loan would cost more than the property earns, and the return would fall to 6.02%.
Scenarios
How the down payment and the rate change cash-on-cash
The same property, rent and expenses, computed with the calculator’s own formulas. Only the financing changes.
| Scenario | Cash invested | Annual cash flow | Cash-on-cash | Leverage effect (pts) |
|---|---|---|---|---|
| 20% down at 6.5% | $46,000 | $3,717.86 | 8.08% | +0.37 |
| 25% down at 6.5% (example) | $55,000 | $4,400.50 | 8.00% | +0.29 |
| 50% down at 6.5% | $100,000 | $7,813.67 | 7.81% | +0.10 |
| All cash (no loan) | $190,000 | $14,640.00 | 7.71% | — |
| 25% down at 7.5% | $55,000 | $3,312.72 | 6.02% | −1.69 |
When the loan costs less than the property earns, borrowing more raises cash-on-cash return, but it also raises the payment, the debt and the chance of negative months. A higher return on less cash is not automatically a better or safer investment.
Interpretation
What cash-on-cash return tells you, and what it does not
Cash-on-cash is the most direct answer to “what does my money earn this year?” It is also easy to inflate by leaving out costs or by borrowing more.
What it tells you
- The first-year, pre-tax yield on the cash you actually put into the deal.
- Whether the property pays you each year after the mortgage, or needs money from you.
- How the financing changes the result: compare it with the all-cash return to see whether the loan helps or hurts.
- A simple way to compare a rental with other uses of the same cash, keeping in mind the work and risk involved.
What it does not tell you
- Appreciation, loan principal paydown and tax effects, which can make the total return higher or lower.
- Anything after year one: rent growth, rising expenses, a refinance or a sale.
- Risk. A high return reached with a small down payment can turn negative after one vacancy or repair.
- The timing of cash flows over many years, which measures such as IRR are designed to capture.
- Whether the inputs are realistic. Optimistic rent or missing reserves inflate the result directly.
In practice
How investors use cash-on-cash return
Investors use cash-on-cash mainly to screen deals and to compare financing choices for the same property.
- Screening listings
- Many investors set a minimum first-year cash-on-cash return for their market and skip properties that cannot reach it with realistic rent and expenses.
- Choosing a down payment
- Running the same property at different down payments shows the trade-off between a higher return on less cash and a larger loan with a bigger payment.
- Comparing with other uses of cash
- Investors compare the expected return with what the same money could earn elsewhere, adjusting for the time a rental takes and the risk it carries.
- Checking leverage before buying
- If the all-cash return is below the loan constant, a bigger loan lowers the return. Seeing that before buying can change the financing, the offer or the decision.
- Tracking a property over time
- Owners recalculate cash-on-cash each year with actual rent and expenses. Because the cash invested stays the same, rising rent shows up as a rising return.
- Valuing repairs and improvements
- Dividing the extra annual cash flow an improvement creates by its cost gives a cash-on-cash return for that project alone, which helps rank upgrades.
Benchmarks · It depends
Typical cash-on-cash targets, and why they vary
There is no universal target. These are figures investors commonly discuss, not promises or recommendations; what is acceptable depends on your goals, market, financing and tolerance for risk.
| Result | What it usually means | Keep in mind |
|---|---|---|
| Below 0% | The property needs money from you each year | Some investors accept it for expected appreciation. That is a bet on future prices and requires cash reserves. |
| About 0% to 5% | Thin cash flow | One vacancy or repair can turn the year negative. Common in high-cost markets and when interest rates are high. |
| About 6% to 12% | Targets often cited by rental investors | Usually requires rents that are high relative to prices, a careful purchase or a lower rate. Make sure every cost is included. |
| Above 12% | Strong on paper | Check the inputs first: missing reserves, optimistic rent, deferred repairs or a very small down payment often explain it. |
A cash-on-cash return is only as good as its inputs. Verify rent with local comparables, taxes with the county, insurance with real quotes and financing with a lender.
Compare metrics
Cash-on-cash vs. cap rate vs. ROI vs. IRR
Each measure answers a different question about the same rental. Use them together rather than picking one.
| Metric | What it divides | Time frame | Includes the loan? |
|---|---|---|---|
| Cash-on-cash return | Annual pre-tax cash flow ÷ cash invested | One year, usually the first | Yes |
| Cap rate | Annual NOI ÷ price | One year | No |
| ROI (total return) | Total gain (cash flow, loan paydown and appreciation, minus selling costs) ÷ cash invested | Usually the whole holding period | Yes |
| IRR | The yearly rate at which all future cash flows, including the sale, are worth exactly the cash invested | The whole holding period, year by year | Yes |
ROI is used in different ways, so ask how a quoted figure was calculated. IRR depends heavily on the assumed sale price and timing. The full analysis in the MyInversorAI app projects long-term measures such as IRR and equity multiple from your assumptions.
Avoid these
Common cash-on-cash mistakes
- Counting only the down payment
- Closing costs, loan fees and the repairs needed before renting are cash you put in. Leaving them out inflates the return.
- Treating rent as cash flow
- Cash flow is what remains after vacancy, every operating expense and the full loan payment, not the rent you collect.
- Forgetting reserves
- Repairs and CapEx arrive on their own schedule. A return without reserves describes a good month, not a typical year.
- Treating the return as guaranteed
- Cash-on-cash is an estimate built on assumptions. Rent, vacancy, insurance and taxes can all change.
- Chasing return with a smaller down payment
- Borrowing more can raise the percentage while increasing the payment, the debt and the chance of negative months.
- Comparing with a savings account as if the risk were the same
- A rental takes time, carries vacancy and repair risk, and is hard to sell quickly. A fair comparison accounts for that.
FAQ
Cash-on-cash return questions
What is a good cash-on-cash return?
There is no single answer. Many rental investors discuss targets of roughly 6% to 12%, but what is acceptable depends on the market, the property’s risk, your financing and what else you could do with the cash. A lower return on a stable property can be reasonable; a high one on a risky property may not be.
What counts as cash invested?
Every dollar you pay to buy the property and get it rented: the down payment, closing costs, loan fees and points, and repairs or furnishing before the first tenant. Money you keep in reserve is not invested in the property, so it is usually left out.
Is cash-on-cash return the same as ROI?
Usually not. Cash-on-cash counts one year of cash flow. ROI often means the total return over the holding period, including loan paydown, appreciation and the sale. Because ROI is used in different ways, ask how a figure was calculated.
Why can a loan lower my return?
A loan raises cash-on-cash only when the property’s all-cash return is higher than the loan constant, the yearly cost of each borrowed dollar including principal. When rates are high compared with what the property earns, borrowing more lowers the return.
Does cash-on-cash include taxes?
No. It is a pre-tax measure. Depreciation and other tax rules can change your after-tax result; a tax professional can explain how they apply to you.
Can cash-on-cash return be negative?
Yes. It is negative when the rent does not cover the operating expenses and the loan payment, which means you add money every year. The calculator shows it as a negative percentage.
Next step
Run the full analysis in MyInversorAI
The free calculators check one long-term rental at a time with your own assumptions. A free MyInversorAI account adds a full property analysis that evaluates up to five strategies (rental, short-term rental, flip, BRRRR and resale) and ZipFinder listings with full addresses and Zillow links. Accounts start on the Free plan; paid plans add an English or Spanish PDF with a property visit guide.
Read before deciding
Educational estimate, not advice
The free calculators are for education and screening. They are not financial, tax, lending, legal or investment advice, an appraisal or a loan offer, and they do not guarantee any result. The figures depend entirely on the assumptions you enter. They are intended for properties in the United States. Before you make a decision, verify rent, taxes, insurance, repairs and financing with qualified professionals.