Cash-on-Cash Return Calculator
Cash-on-Cash Return
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Annual Cash Flow
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Monthly Cash Flow
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Effective Gross Income
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Understanding Cash-on-Cash Return
Cash-on-cash return measures the annual pre-tax cash flow as a percentage of total cash invested. Unlike cap rate, it accounts for financing. The formula is: CoC Return = Annual Pre-Tax Cash Flow / Total Cash Invested x 100. Total cash invested includes down payment, closing costs, and any initial renovation costs.
To calculate annual cash flow: start with gross rent, subtract vacancy losses to get Effective Gross Income (EGI), subtract operating expenses to get NOI, then subtract annual debt service (mortgage payments). The result is your pre-tax cash flow — the actual money that goes into your pocket each year.
A good cash-on-cash return depends on the market and your risk tolerance. Many investors target 8-12% cash-on-cash return. Returns above 12% are excellent, while returns below 6% may not justify the effort and risk of owning rental property compared to more passive investments like index funds.
Frequently Asked Questions
What is a good cash-on-cash return?
Most investors target 8-12%. Returns above 12% are excellent. Below 6% may not be worth the effort. In expensive markets, 5-7% may be acceptable if appreciation potential is strong.
How is cash-on-cash different from cap rate?
Cap rate ignores financing and measures property-level return (NOI/Price). Cash-on-cash measures investor-level return, accounting for leverage (financing). The same property can have different CoC returns depending on the financing terms.
What counts as total cash invested?
Down payment, closing costs, loan origination fees, appraisal fees, inspection costs, and any initial renovation or repair costs before the property is rent-ready.
Does cash-on-cash return include appreciation?
No, it only measures cash flow return. Total return on a rental property includes cash flow, appreciation, principal paydown (equity buildup), and tax benefits. Cash-on-cash is just one piece of the total return picture.