Cash-on-Cash Return Calculator

Annual pre-tax cash flow = NOI − annual mortgage payments (principal + interest)
Cash-on-cash return = annual pre-tax cash flow ÷ total cash invested × 100

• NOI is a year of rent and other income, minus vacancy, minus operating expenses such as taxes, insurance, maintenance, management and capital reserves. It does not include the mortgage.
• Annual mortgage payments are twelve monthly principal and interest payments on the loan (purchase price minus down payment). Both parts reduce the cash you take home, so both are subtracted here.
• Total cash invested is the down payment plus closing costs plus any repairs you pay for before the first tenant moves in. The loan itself is not your cash and is not counted.
• What is not counted: the principal your payments retire each year, appreciation, depreciation and income taxes. That is why cash-on-cash is not the same as total return or ROI.

The calculator starts with a $210,000 rental bought with 25% down on a 30-year loan at 6.75%.

1. Cash invested: $52,500 down + $6,600 closing + $8,000 repairs = $67,100.
2. Income: $2,200 × 12 = $26,400, less $1,320 vacancy = $25,080.
3. NOI: $25,080 − $9,300 operating expenses = $15,780.
4. Mortgage: $1,021.54 a month on a $157,500 loan, or $12,259 a year.
5. Pre-tax cash flow: $15,780 − $12,259 = $3,521 a year.
6. Cash-on-cash return: $3,521 ÷ $67,100 × 100 = 5.25%.

Compare that with the cap rate of 7.51%. Bought all cash, the same property would return 7.03% on $224,600. The loan's annual payments cost 7.78% of the loan amount each year, more than the property earns, so here borrowing lowers the cash return. Leverage only raises cash-on-cash when the property earns more than the loan costs.

It depends on your goals and your alternatives. A common rule of thumb among rental investors is to look for 8% to 12% in markets bought mainly for cash flow. That is a rule of thumb, not a market statistic, and many investors accept less where they expect rent growth or appreciation.

Ways to judge your number:

• Compare it with safer options. If a savings account or bond pays close to your cash-on-cash return, the rental has to make up the difference through loan paydown and appreciation, with more work and risk.
• Compare it with the cap rate. If cash-on-cash is below the cap rate, your financing is reducing your cash return. That can still be a choice you make on purpose, but you should see it.
• Stress-test it. Raise vacancy, add a repair year or lower the rent and watch how fast the return drops. A thin positive cash flow can turn negative after one bad month.

For a complete picture over a holding period, the rental property calculator adds projections, and the DSCR calculator shows how a lender will view the same income.

• Leaving closing costs or upfront repairs out of cash invested, which makes the return look higher than it is.
• Subtracting only the interest part of the mortgage. Principal payments leave your bank account too, so they reduce cash flow.
• Skipping vacancy, management or capital reserves because you plan to self-manage or the unit is new.
• Calling cash-on-cash your ROI. It ignores loan paydown, appreciation and taxes, so it is a one-year cash yield.
• Comparing a financed deal's cash-on-cash with an all-cash deal's cap rate. Compare like with like.
• Using an interest rate you have not been quoted. Investment property loans often price higher than owner-occupied loans.

Cash-on-cash answers one question: how much cash does my money produce this year? A rental can build wealth in other ways that this number does not show. Each mortgage payment retires some principal, which adds to your equity. The property may appreciate. Depreciation can reduce the tax on your rental income.

Those are real, but they are not cash in hand, and appreciation is not guaranteed. Many investors look at both: cash-on-cash to make sure the property pays its own way, and a total-return projection to see the longer-term case. For how rental income and expenses are recorded and reported, see rental property accounting basics.

What counts as total cash invested?

Every dollar you paid out of pocket to acquire the property and make it rentable: the down payment, closing costs, loan fees, and upfront repairs or rehab. Money you borrow is not included, because it is not your cash.

Is cash-on-cash return the same as ROI?

No. Cash-on-cash only counts the cash flow you receive in a year. It leaves out the principal your tenants pay down on the loan, any appreciation, and tax effects such as depreciation. A total-return or ROI calculation adds those, so it is usually higher than cash-on-cash on a financed rental.

Why is my cash-on-cash return lower than my cap rate?

Usually because the loan costs more than the property earns. If the annual mortgage payment as a share of the loan amount is higher than the cap rate, each borrowed dollar costs more than it brings in, and leverage pulls your cash return down. Closing costs and rehab, which raise the cash you invest but not NOI, also lower it.

Is cash-on-cash return calculated before or after taxes?

Before income taxes. Your actual after-tax return depends on depreciation, your tax bracket and other income, so it differs from one investor to the next. Talk to a tax professional for that number.

• Cap Rate Calculator

  Net operating income ÷ property value, plus the price a target cap rate implies.

• Rental Property Calculator

  Monthly cash flow, cap rate and cash-on-cash return, counting rehab and holding costs.

• DSCR Calculator

  Debt service coverage the way lenders compute it: NOI method and rent ÷ PITIA.

• BRRRR Calculator

  Cash left in the deal after the refinance, including holding costs during the rehab.

See all landlord and investor calculators

• Real Estate Investment Analysis: How to Evaluate Rental Properties
• Rental Property Accounting: Bookkeeping Basics for Landlords