Real Estate & Credit
Cash on Cash Return Calculator
Measure the return on the cash you actually put into a rental.
Cash on Cash Return Calculator
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How it works
Cash on cash return divides the annual cash flow you pocket by the cash you actually put in — the down payment, closing costs and any renovations paid in cash. It answers the question the cap rate ignores: what does my money earn once leverage is involved?
Because it compares against your invested cash rather than the full property value, this is the metric a leveraged investor watches first. More leverage raises cash-on-cash when rents cover the debt, but it also raises risk.
Formula
Cash on cash = Annual pre-tax cash flow / Cash invested
Cash flow is rent minus operating costs minus debt service; cash invested is your out-of-pocket equity.
Worked example
Example: you put $80,000 down on a rental and pocket $12,000 a year after the mortgage. Cash on cash = 12000 / 80000 = 15%. The same building bought all-cash might show a 6% cap rate.
WORKED EXAMPLE — DEFAULT INPUTS
What to know
Leverage is a magnifier in both directions. A property with a 6% cap rate can show a 12-15% cash-on-cash return when a mortgage covers most of the price at a lower rate, because the cash flow stacks on a smaller cash base. But the same leverage turns a vacancy spike into negative cash flow quickly.
Investors who quote cash-on-cash should also run the no-vacancy and high-vacancy scenarios. The metric is only as stable as the rent assumptions behind it, and a 15% return on paper means little if the unit sits empty for four months.
FAQ
What is a good cash on cash return?
Many investors target 8-12% to compensate for the work and illiquidity of real estate. Compare against what passive investments could earn for the same risk.
How is this different from the cap rate?
Cap rate uses the full property value and ignores financing. Cash on cash uses only the money you invested, so it captures the effect of a mortgage.
What counts as cash invested?
Down payment, closing costs, and cash spent on repairs or renovations. If you borrowed for the rehab, only the cash portion counts.
Why did my return drop after refinancing?
Cash-out refinancing removes cash from the deal, which changes the denominator. If the new cash flow is similar, the return on remaining equity can rise or fall.