Cash required and return at 30% down
Three purchase prices at a 7% gross yield, 6.5% over 30 years, 30% down. Cash required is the down payment; closing costs and repairs would add to it.
| Purchase price | Monthly rent | Cash required | Annual cash flow | Cash-on-cash |
|---|---|---|---|---|
| $250,000 | $1,458 | $75,000 | -$1,901 | -2.5% |
| $400,000 | $2,333 | $120,000 | -$3,040 | -2.5% |
| $600,000 | $3,500 | $180,000 | -$4,556 | -2.5% |
The cap rate at a 7% gross yield and 35% expense load is the same 4.5% regardless of how you finance it; only the cash-on-cash moves with the down payment.
How the 30% down return is calculated
Cash invested = $400,000 × 30% + closing costs
Cash-on-cash = annual cash flow ÷ cash invested
Annual cash flow = NOI − annual debt service
The down payment acts on both sides of the ratio. A bigger down payment cuts the loan, which lifts NOI-minus-debt cash flow, but it also raises the cash invested the return is measured against. Whether 30% down wins depends on the gap between the property's cap rate and the mortgage rate.
When 30% down makes sense
- The property's cap rate is below your mortgage rate, so leverage is a drag and more cash down is safer.
- The lender requires it: below 20% down usually means mortgage insurance or a higher investor rate.
- You want a smaller loan for cash-flow stability rather than maximum leverage.
- You are comparing it against a higher-leverage option and need the honest cash-on-cash on both.
Price the building itself with the cap rate calculator, or run your own down payment and rate on the full cash-on-cash calculator.
Frequently asked questions
4 answers, no funnel.
What is the cash-on-cash return on a 30% down payment?
At a representative 7% gross yield, 6.5% financing and a 35% expense load, a 30% down payment produces about -2.5% on a $400,000 property. The exact number moves with rent, the rate and the expense load, all of which the interactive calculator lets you change.
How much cash do I need with 30% down?
On a $400,000 purchase, a 30% down payment is $120,000 before closing costs. Add title, loan fees, inspections and any immediate repairs to get the true cash-in-deal figure that cash-on-cash divides into.
Does a lower down payment always raise cash-on-cash?
No. A smaller down payment shrinks the denominator, which lifts the ratio, but it also raises the loan and the debt service, which lowers the numerator. The net effect depends on whether the property's cap rate beats the mortgage rate; when the rate is higher, more leverage drags the return down.
What down payment do investors usually put on a rental?
Twenty percent is the common baseline for a conventional investor loan, with 15% to 25% typical in practice. Below 20% often means mortgage insurance on an owner-occupied loan or a higher-rate investor product. The trade-off is always cash required versus leveraged return.