Cash-on-Cash Return Calculator

The cash-on-cash formula

Cash-on-cash = annual cash flow ÷ total cash invested. Total cash invested is the down payment plus every dollar you wire at closing: loan fees, title, inspections, and repair credits. Annual cash flow is NOI minus the mortgage payment. The result is the percentage your own money earned this year before taxes and before any appreciation.

Where cap rate measures the property, cash-on-cash measures the deal: the same building can be a 6% cap and a 2% or 12% cash-on-cash depending entirely on the loan you put on it.

Worked example

20% down ($60,000) plus $3,000 closing on a $300,000 duplex: $63,000 invested. NOI of $27,000 minus ~$18,200 of 6.5% debt service leaves $8,800 cash flow. Divide: $8,800 ÷ $63,000 = 14.0% cash-on-cash against a 9.0% cap, cheap debt magnified the return.

That example uses a 30-year loan; the building's unleveraged 9.0% cap never moves no matter the financing, only your slice of it does.

Worked example 2: when a high cash-on-cash hides a thin deal

A high cash-on-cash usually means a small denominator, and a small denominator means leverage. Take a $200,000 rental grossing $24,000 a year with $10,000 of expenses, leaving $14,000 of NOI. An investor puts 5% down, $10,000, plus $3,000 in closing, so $13,000 of real cash, and finances the rest on a seller note at 7% interest-only. That payment is $13,300 a year, leaving $700 of cash flow.

Divide and the deal screens beautifully: $700 ÷ $13,000 = 5.4%, and on a smaller cash base or a cheaper note the same shape prints double digits. The number looks like a win because almost none of your own money is in it. That is the tell. Cash-on-cash rewards a tiny denominator, and a tiny denominator is borrowed money.

Now the hidden part. The seller note balloons in five years, so the full balance comes due whether or not the property has appreciated enough to refinance. If the note carried any negative amortization the balance has grown, not shrunk. And at 95% leverage there is no cushion: one vacant month cuts NOI by $2,000 to $12,000, and the deal that screened at 5.4% now fails to cover its own $13,300 note.

The lesson cuts both ways. The same leverage that magnifies a good year magnifies a bad one, and cash-on-cash shows only the good year. Read a high CoC as a measure of how little cash is protecting the deal, then ask what happens to it on one vacancy, one repair, or one balloon.

Case study: the house hack that looked better than it was

Cash-on-cash depends entirely on how you count invested capital, and house hacks are where that counting gets creative. A 3-unit property costs $330,000. The owner puts 10% down, $33,000, plus $4,000 in closing, so $37,000 of cash, occupies one unit, and rents the other two for $2,400 a month combined, $28,800 a year. Expenses run $9,600, leaving $19,200 of NOI.

The loan is $297,000 at 6.5% over 30 years, about $22,507 a year of debt service. Cash flow is $19,200 minus $22,507, negative $3,307, a CoC of -8.9%. But the naive version ignores the mortgage the owner would pay anyway and computes only rent over cash: $28,800 ÷ $37,000 reads like a return when it is really just gross rent divided by a down payment. That is the first miscount.

The second miscount is opportunity cost. The owner lives in one unit free, which is a real benefit, but it is not cash flow; count it and you are paying rent to yourself. And the $37,000 left in an index fund at 5% would earn about $1,850 a year with no tenants. Net the honest way and the deal's true cash return is the -8.9% CoC, offset by housing the owner no longer pays for, not the flattering figure the gross-rent shortcut prints.

The lesson: house hacks are worth doing, but judge them on what they save, not on a cash-on-cash that counts imputed rent as income and ignores what the down payment could have earned elsewhere. Count capital the same way every time or the number lies.

What is a good cash-on-cash return?

8% or better is solid for a stabilized rental; 5–8% works where appreciation pulls weight; below 5% rarely justifies landlording. Above 12% sustained usually means hidden risk, not genius. Always compare against a ~10% index fund with zero toilets.

The math behind the comparison: an S&P 500 index fund returns ~10% nominal historically, while the rental adds leverage, tax depreciation, and tenant-paid principal on top of CoC. Count equity build and paydown separately.

What affects cash-on-cash

The loan is the big dial: rate, down payment, and upfront costs move CoC more than rent does. One rate point adds roughly 10–12% to the payment; thin-cash deals flip negative on one vacancy; a $15,000 rehab on $50,000 invested wrecks year one. Every $1,000 surprise costs a point per $100k.

Concretely: at 6.5%, 20% down usually beats 5% down and both beat 50% down, thin cash flatters until one vacancy flips it.

Rate is the cleanest lever to feel. On a $240,000 loan over 30 years, moving from 6.0% to 7.0% raises the annual payment from about $17,270 to $19,160, a difference of $1,890 a year. Against $60,000 of invested cash that is more than three points of cash-on-cash, gone to a single rate point, before anything else about the deal changes.

Down payment works the opposite way, and it is the dial most buyers over-turn. Putting less down shrinks the denominator and inflates the percentage, which is why a 5%-down deal can screen higher than a 50%-down deal on the identical building. The catch is that the thin version carries the most debt against the least cushion, so its high number is the most fragile on the page.

Upfront costs are the quiet leak. Loan fees, title, inspection, and repair credits all enter the denominator the day you close, and a $15,000 rehab on $50,000 of invested cash turns a 12% year-one return into a 9% return before a tenant moves in. Model the rate a point higher, the down payment a notch bigger, and the repairs at full cost; the deal that still cash-flows is the one worth buying.

The tax side cash-on-cash hides

Cash-on-cash is quoted pre-tax while your index-fund comparison is post-tax. The rental is undersold twice. Depreciation on the building shelters most early cash flow, and the 20% pass-through deduction covers much of the rest. A 5–6% CoC often equals a 7–8% brokerage return after tax.

On a $300,000 property with a $240,000 building basis, roughly $8,700 of paper loss shelters $8,700 of cash flow, and passive-loss rules do the rest. Run the numbers with your accountant, not a blog.

The return components cash-on-cash misses

Cash-on-cash counts only year-one cash in hand. A full first year adds principal paydown (~3% of loan balance), appreciation, and the depreciation tax shield. A 4% CoC plus those three can quietly beat an 8% CoC in a flat market.

Depreciation typically shelters most rental profit for a decade or more. Track all four lines, cash, paydown, appreciation, shield, for a year and you will know your real number.

Why thin-CoC deals go bad fast

At low CoC the margin is the deal: $8,400 of annual cash flow dies to −$1,400 on one two-month vacancy plus a $6,000 roof, a normal year, not a disaster. Demand cushion: after a 10% vacancy shock and a $5,000 repair, the deal should still roughly breakeven.

The example is 9% CoC on $95k invested. The fix is cushion in the price or less leverage. Type the bad year into this calculator's expense box and see for yourself.

The stress test is the only CoC number that matters, because the good year takes care of itself. A deal that reads 12% on the listing sheet and 1% after a realistic vacancy and one repair is a 1% deal wearing a costume. Run the bad year first, and if the property still clears your floor with a vacant unit and a full-price repair in the books, the good year is upside rather than the whole case. Investors who skip this step learn the difference between the advertised return and the durable one in their first winter.

The leverage crossover: when your rate decides your return

Compare your mortgage rate to the cap rate: rate below cap means every borrowed dollar earns more than it costs, lifting cash-on-cash above the cap, positive leverage. Rate above cap means each dollar drags, sinking CoC below it, because cap rate ignores financing entirely while CoC carries the loan. Most 2026 deals sit near the crossover.

Lenders read the same crossover as risk: whether the income covers the mortgage is the 1.25× test, and thin coverage plus negative leverage is how approvals die. At 100% down with no closing costs in the basis the loan vanishes and cash-on-cash equals the cap rate exactly; with closing costs it runs slightly lower. Leverage is the only thing separating the two numbers, in either direction. The extreme case is a cash-out refinance that returns most of your basis: run that deal through the BRRRR calculator to see the return measured against only the cash left behind.

Cash-on-cash vs IRR vs total ROI: three return metrics, three jobs

These three get quoted as if they were interchangeable and they are not. Cash-on-cash is year one only, a single snapshot. IRR is time-weighted across the entire hold, so it cares when money moves. Total ROI is the raw profit number with no clock at all. Pick the wrong one and you compare a sprint to a marathon.

Each metric answers a different question about the same dollars. Cash-on-cash tells you what year one pays, IRR tells you what the whole hold earns per year, and total ROI tells you how much you made overall. Here is when each one is the right tool and when it misleads.

Screen the first year with cash-on-cash, judge the hold with IRR, and sanity-check the exit with total ROI.

How cash-on-cash targets differ by strategy

There is no universal good cash-on-cash, because the right number depends on what the strategy is trying to do. The same 6% is a win for one investor and a failure for another. Here is how four common strategies set their bar.

Buy-and-hold investors target 8% or better, because the plan is to live on the cash flow for years. Below that, the work of landlording stops paying versus a passive index. The number is the point.

BRRRR investors chase an infinite cash-on-cash. After the cash-out refinance returns all of the original capital, the denominator drops to zero and the ratio balloons without bound. The return is real, but so is the debt that remains, so the number measures recovered cash, not safety.

House hackers accept any positive cash-on-cash, sometimes even a slightly negative one, because the real return is a housing cost they no longer pay. The deal is judged on savings, not on cash produced.

Flippers do not use cash-on-cash at all. There is no hold and no rent, so they measure flip ROI instead, which the fix and flip calculator computes in one pass. The takeaway: cash-on-cash is strategy-specific, not universal. Match the target to the plan before you trust the number.

Three cash-on-cash mistakes that mislead investors

Three counting errors make a weak deal look strong: comparing pre-tax CoC to post-tax index returns, using gross rent instead of net cash flow, and leaving closing costs and rehab out of cash invested. Each one inflates the number you see over the one you actually earn. Here is each in real numbers, the cost, and the fix.

Comparing pre-tax CoC to post-tax index returns: a 9% cash-on-cash looks like a loser next to a 10% index fund, but the rental is pre-tax and the index figure is usually quoted after. With depreciation sheltering most of the cash flow, that 9% can equal a higher after-tax return than the index. The cost of the confusion is abandoning a good deal. The fix: compare after-tax to after-tax, or pre-tax to pre-tax, never across.

Using gross rent instead of net cash flow: $24,000 of gross rent on $100,000 invested reads as a 24% return until you subtract the $10,000 of expenses and $13,300 of debt service. The real cash flow is $700, a 0.7% CoC. The cost is buying a deal that pays almost nothing. The fix: the numerator is always NOI minus debt service, never rent.

Forgetting closing costs and rehab in cash invested: $60,000 down on a deal with $8,800 of cash flow reads as 14.7%. Add the $3,000 closing and $12,000 of immediate repairs and the real invested cash is $75,000, an 11.7% CoC. The cost is three points of phantom return. The fix: every dollar wired before the doors open belongs in the denominator.

Same building, two financings

Same $300,000 duplex, same $27,000 of NOI (how NOI is built), two financings, two returns. All-cash ($305,000 with closing): $27,000 ÷ $305,000 ≈ 8.9%, just under the 9.0% cap rate because the closing costs sit in the basis. 25% down at 7% ($80,000 in): ~$9,037 cash flow ÷ $80,000 ≈ 11.3%. Financing alone moved it two points.

The 25%-down leg borrows $225,000 at 7% for 30 years, about $17,963 a year in debt service, leaving $9,037 from $27,000 of NOI. And when even the price is unknown, screen fast before you finance: monthly rent at 1% of price is the one-line filter this whole page assumes you already passed.

Read the spread, not just the winner: the levered leg pays $9,037 a year on $80,000 while the all-cash leg pays $27,000 on $305,000, smaller dollars, bigger percentage. That tradeoff, cash today versus cash committed, is the entire financing decision.

Which calculator to use next

Cash-on-cash is the verdict, not the screening. Before you trust it, run the deal in the order the numbers build on each other. Start with the building's unleveraged yield to see what the property itself earns before your loan touches it. Then rebuild the income line with the NOI calculator, because every return on this page divides that number, and a soft NOI makes every downstream ratio look better than the deal is.

Once the income is honest, pressure-test the financing. Check whether a lender will fund it with the 1.25× coverage test, since a strong cash-on-cash on a deal the bank will not finance is a return you cannot collect. If the plan is to recycle one down payment across several doors, run the same inputs through the BRRRR calculator to see the return measured against only the cash left in after the refinance. Screen first, underwrite second, and let cash-on-cash have the last word.

Cash-on-cash describes year one, which is the least informative year of a long hold. The way to see what rent growth, principal paydown and the sale add to the same deal is to project cash flow across the full hold.