🏘️ Cash-on-Cash Return Calculator
A cash-on-cash return calculator for rental property: annual pre-tax cash flow divided by actual cash invested, shown next to the unleveraged cap rate.
What Cash-on-Cash Return Calculator Does
Cash-on-cash return answers one specific question: on the actual dollars you put in, what percentage did you get back this year. It divides annual pre-tax cash flow by the cash you actually invested — the down payment, closing costs and any upfront repairs — not the property's full purchase price.
That distinction from cap rate is the entire point of the metric. Cap rate divides net operating income by the purchase price and deliberately ignores financing, which makes it useful for comparing an unmortgaged building against a mortgaged one. Cash-on-cash puts the mortgage back in: it subtracts the annual mortgage payment from NOI first, then divides by only the cash that came out of your own pocket. Two investors buying the identical property with different financing get different cash-on-cash returns from the same building.
Leverage is what makes the two numbers diverge, and it can cut either way. When a property's cap rate is higher than the interest rate on the loan, borrowing to buy it amplifies your return — cash-on-cash comes out above cap rate. When the loan rate is higher than the cap rate, leverage works against you, and cash-on-cash lands below cap rate on the same building. Neither outcome means the arithmetic is wrong; it means the loan terms are doing exactly what loan terms do.
This site also has a full commercial cap rate and underwriting calculator (linked below) that computes DSCR, debt yield and loan-to-value alongside cash-on-cash for lender-grade analysis. This page is the direct, single-purpose version for the specific "what percentage am I actually earning" question.
How to Use Cash-on-Cash Return Calculator
- Enter the purchase price, down payment percentage, and closing costs
- Enter the annual gross rental income and operating expenses
- Enter the annual mortgage payment to see cash flow, cash-on-cash return, and cap rate side by side
Formula Used by Cash-on-Cash Return Calculator
Cash-on-cash return
CoC = (NOI − annual debt service) ÷ total cash invested × 100
- NOI
- Net operating income — gross rental income minus operating expenses, before the mortgage
- annual debt service
- The full year's mortgage payments, principal and interest
- total cash invested
- Down payment + closing costs + any upfront repair costs — not the purchase price
Worked example
$300,000 property, 25% down ($75,000) plus $5,000 closing costs, $24,000 annual gross rent, $6,000 operating expenses, $14,400 annual mortgage payment.
- Cash invested: 75,000 + 5,000 = $80,000
- NOI: 24,000 − 6,000 = $18,000
- Cash flow: 18,000 − 14,400 = $3,600
Result: 3,600 ÷ 80,000 = 4.5% cash-on-cash return.
Leverage can push cash-on-cash above or below the cap rate
cap rate = NOI ÷ purchase price (same NOI, no financing)
Worked example
The same $300,000 property, $24,000 NOI, $80,000 cash invested, compared at two different mortgage payment levels.
- Cap rate (unleveraged): 24,000 ÷ 300,000 = 8.0%
- Cheap debt, $14,400/yr payment: cash flow 24,000 − 14,400 = 9,600 → CoC = 9,600 ÷ 80,000 = 12.0%
- Expensive debt, $22,000/yr payment: cash flow 24,000 − 22,000 = 2,000 → CoC = 2,000 ÷ 80,000 = 2.5%
Result: Same property, same 8% cap rate — 12.0% cash-on-cash with cheap financing (positive leverage), 2.5% with expensive financing (negative leverage).
Cash-on-cash return ranges investors commonly cite
Loosely-held rules of thumb, not a standard — acceptable ranges vary by market, property type and risk tolerance, and no organization publishes an official benchmark.
| Range | Commonly read as |
|---|---|
| Under 5% | Low — often a stable, low-risk market or heavy leverage cutting into cash flow |
| 5–8% | Modest, typical of competitive, lower-risk markets |
| 8–12% | A commonly cited solid target range for a rental property |
| Over 12% | Strong, and usually compensating for more risk, more management effort, or a less liquid market |
How to Read Your Result
Cash-on-cash and cap rate answer different questions
Cap rate tells you what the building itself yields, independent of how it is financed — useful for comparing deals on a level footing. Cash-on-cash tells you what your own money is earning, given the specific loan you actually got. Quoting one number as if it were the other is the most common way a deal gets misread.
A higher number is not automatically a better deal
A high cash-on-cash return can come from a small amount of cash invested against a large mortgage, not from an especially good property — heavy leverage inflates the percentage while also increasing the risk that a vacancy or a rate change turns the cash flow negative. Look at cap rate and debt service coverage alongside cash-on-cash before treating a high number as low-risk.
Cash flow going negative is the real warning sign
If annual debt service exceeds NOI, cash-on-cash return is negative — the property is costing its owner money every year before any tax benefit or appreciation is counted. That is a materially different situation from a merely low positive return, and this calculator reports it plainly as a negative percentage rather than rounding it away.
Limitations & Accuracy Notes
- Pre-tax only. Depreciation, mortgage interest deductions and other tax effects can change an investor's actual after-tax return substantially and are not modeled here.
- A single-year snapshot. It does not project rent growth, refinancing, appreciation or the eventual sale — for a multi-year projection, model each year's cash flow separately.
- Assumes the annual mortgage payment entered is accurate and constant; an adjustable-rate loan or a payment that changes mid-year needs to be re-run for each period.
- Does not include vacancy modeling, capital expenditure reserves, or the lender-side ratios (DSCR, debt yield, loan-to-value) that the fuller commercial cap rate calculator on this site computes for underwriting-grade analysis.
- Nothing here is investment advice.
Frequently Asked Questions
What is the cash-on-cash return formula?
What is a good cash-on-cash return?
What is the difference between cash-on-cash return and cap rate?
Does cash-on-cash return include the mortgage payment?
Why is cash invested not the full purchase price?
Is my data stored?
References & Further Reading
- Consumer Financial Protection Bureau — Understand the different kinds of loans available — Background on fixed-rate mortgage structure and how the principal-and-interest payment behaves, underlying the annual debt-service figure used here