Cash on Cash Return Calculator for Rental Property
Cash on cash return answers the question every rental investor really cares about: for each dollar I actually put into this deal, how many dollars come back to me each year? This cash on cash return calculator includes your mortgage, vacancy, operating costs and repair reserves, then shows your yearly and monthly cash flow, your cash on cash return, and the cap rate and DSCR lenders look at.
Cash on cash return calculator
Pre-tax figures. Percent-of-rent expenses are taken on rent collected after vacancy. Nothing you enter leaves your browser.
What is cash on cash return?
Cash on cash return (CoC) compares the cash a property puts in your pocket in a year with the cash you put into it. Unlike the cap rate, it includes your mortgage, so it shows the effect of leverage: the same property can produce a very different cash on cash return with 20% down than paid in full.
How to calculate cash on cash return
1. Total cash invested
Down payment + closing costs + any repairs before the first tenant. In the example: 25% of $200,000 = $50,000, plus $6,000 closing costs and $8,000 of repairs = $64,000.
2. Net operating income
Rent collected after 5% vacancy is $25,080 a year. Taking off taxes, insurance, maintenance and management ($7,613) leaves an NOI of $17,467.
3. Debt service and reserves
The loan is $150,000 at 7.0% over 30 years, a monthly principal-and-interest payment of $998 ($11,975 a year). A 5% reserve for big-ticket items such as roofs and appliances sets aside $1,254.
4. Cash flow and the return
Annual cash flow = $17,467 − $1,254 − $11,975 = $4,238 ($353 a month). Cash on cash return = $4,238 ÷ $64,000 = 6.62%.
The monthly payment comes from the standard amortization formula, payment = L × r ÷ (1 − (1 + r)−n), where L is the loan, r the monthly interest rate and n the number of monthly payments.
How the down payment changes your return
Same property, same rent, different leverage:
| Down payment | Cash invested | Annual cash flow | Cash on cash |
|---|---|---|---|
| 20% | $54,000 | $3,439 | 6.37% |
| 25% | $64,000 | $4,238 | 6.62% |
| 35% | $84,000 | $5,834 | 6.95% |
| All cash | $214,000 | $16,213 | 7.58% |
Why? Leverage pays only when the property earns more on each dollar than that dollar costs to borrow. Here the property yields 7.58% a year on everything you spend (cash flow before the mortgage ÷ price, closing costs and repairs), while each borrowed dollar costs 7.98% a year in payments (the "mortgage constant": a 30-year loan's payments include principal as well as interest). Since 7.58% is below 7.98%, more debt lowers your cash on cash return, even though the cap rate looks healthy. Change the rate or rent in the calculator to see where the balance tips.
What is a good cash on cash return?
Many rental investors aim for roughly 8% to 12%, but the right target depends on your market and goals. In high-priced areas with strong appreciation, investors often accept lower cash on cash returns; in cheaper markets they expect more cash flow to make up for slower growth and higher risk. Compare the result with what your cash could earn elsewhere at similar risk.
What cash on cash return leaves out
- Loan paydown: part of each mortgage payment builds your equity, but it is not cash in hand.
- Appreciation: any rise in the property's value.
- Taxes: it is a pre-tax measure; depreciation can shelter some rental income (see IRS Publication 527).
- Time: it is a one-year snapshot, so rent increases and future repairs are not included.
Frequently Asked Questions
How do you calculate cash on cash return?
Divide the property's annual pre-tax cash flow (rent after vacancy, minus operating expenses, reserves and mortgage payments) by the total cash you invested (down payment, closing costs and upfront repairs), then multiply by 100.
What is the difference between cap rate and cash on cash return?
Cap rate ignores financing and measures the property itself: NOI divided by price. Cash on cash return includes your mortgage and measures your return on the cash you actually invested.
Is 10% a good cash on cash return?
For many rental investors, yes: 8% to 12% is a common target range. Whether it is good for you depends on the market, the risk of the property and what else your money could earn.
Does cash on cash return include appreciation?
No. It only counts the cash the property pays you in a year. Appreciation and loan paydown add to your total return but are not part of cash on cash return.
What is DSCR and why does it matter?
The debt service coverage ratio is NOI divided by yearly mortgage payments. Rental (DSCR) lenders commonly want at least about 1.2, meaning the property earns 20% more than its loan payments.
Sources
- IRS Publication 527, Residential Rental Property (operating expenses, depreciation).
- The standard fixed-rate loan amortization formula, as used in every mortgage payment schedule.