Cash-on-Cash Return Calculator
How Cash-on-Cash Return Works
Cash-on-cash return measures the annual pre-tax return on the actual cash you invest in a rental property. Unlike cap rate, which ignores financing, cash-on-cash captures the effect of leverage — how borrowing money amplifies (or diminishes) your returns. It is a core metric in real estate investment analysis because it directly measures your personal return on deployed capital.
The formula has three components:
Step 1 — Total Cash Invested: Down payment plus closing costs. If you buy a $250,000 property with 20% down ($50,000) and 3% closing costs ($7,500), your total cash invested is $57,500. This is the denominator of the cash-on-cash calculation and represents your actual out-of-pocket cost.
Step 2 — Annual Cash Flow: Net Operating Income (NOI) minus annual debt service (total mortgage payments for the year). NOI is gross rent adjusted for vacancy minus operating expenses. See our cap rate calculator for a detailed breakdown of how NOI is calculated.
Annual mortgage payments are calculated using the PMT function with your loan amount, interest rate, and term. The calculator computes this automatically — enter your interest rate and loan term, and the monthly payment appears instantly.
Step 3 — Cash-on-Cash Return: Cash-on-Cash = Annual Cash Flow / Total Cash Invested. A property generating $4,800/year in cash flow on $57,500 invested delivers an 8.35% cash-on-cash return.
The power of leverage: Cap rate ignores financing. Cash-on-cash shows what your actual cash earns. A 6% cap rate property can deliver 10%+ cash-on-cash with favorable financing — or negative returns if the mortgage payment exceeds NOI. This is why experienced investors evaluate both metrics together. For a complete monthly view of cash flow, use our rental property cash flow calculator.
The DSCR calculator can help you verify whether the property’s income comfortably covers the debt service before committing.
How to Use This Calculator
- Purchase Price — Enter the total property acquisition cost.
- Down Payment (%) — Conventional investment loans typically require 20-25% down. FHA (owner-occupied) allows 3.5%. VA loans allow 0% for eligible veterans.
- Closing Costs (%) — Estimate 2-5% of the purchase price. This includes loan fees, title insurance, appraisal, attorney fees, and prepaid escrow items. Your lender can provide a detailed Loan Estimate.
- Interest Rate — Your mortgage interest rate. Check current rates with multiple lenders. Even 0.25% differences significantly impact monthly payments and cash-on-cash return.
- Loan Term — Standard is 30 years. A 15-year term increases payments but builds equity faster. Investment property loans may offer 25-year terms.
- Monthly Rental Income — Expected monthly rent at full occupancy. Research comparable rents on Zillow, Rentometer, or local MLS data.
- Vacancy Rate — Expected annual vacancy as a percentage. Use 5% for strong rental markets, 8-10% for weaker markets or properties with higher turnover.
- Annual Operating Expenses — Property taxes, insurance, maintenance, repairs, HOA fees (if applicable), and other recurring costs. Exclude mortgage payments (the calculator handles those separately).
Review the cash-on-cash return alongside the cap rate and DSCR to get a complete picture of the investment. If DSCR is below 1.0, the property has negative cash flow — reconsider or adjust your down payment.
Worked Examples
Elena — First Rental in Indianapolis
Elena is buying her first investment property — a 3-bedroom single-family home in Indianapolis listed at $180,000. Comparable rentals show $1,400/month is achievable. She’s putting 20% down with a conventional investment loan at 6.5% for 30 years. Closing costs are estimated at 3%. Operating expenses including taxes and insurance total $4,800/year. The Indianapolis market has low vacancy around 5%.
Inputs
- Purchase Price
- $180,000
- Down Payment (%)
- 20%
- Closing Costs (%)
- 3.0%
- Interest Rate
- 6.50%
- Loan Term (years)
- 30 years
- Monthly Rental Income
- $1,400
- Vacancy Rate
- 5.0%
- Annual Operating Expenses
- $4,800
Results
- Cash-on-Cash Return
- 0.57%
- Annual Cash Flow
- $238
- Net Operating Income
- $11,160
- Monthly Mortgage Payment
- $910
- Cap Rate
- 6.20%
- Debt Service Coverage
- 1.02
- Total Cash Invested
- $41,400
David — Experienced Investor with Kansas City Duplex
David is an experienced investor adding a duplex in Kansas City to his portfolio. The property is listed at $320,000 with each unit renting for $1,400/month ($2,800 total). He’s putting 25% down to secure a better rate of 6.75% on a 30-year term. Closing costs are 2.5% (he negotiated seller credits). Operating expenses are $9,600/year. Kansas City has stable 5% vacancy.
Inputs
- Purchase Price
- $320,000
- Down Payment (%)
- 25%
- Closing Costs (%)
- 2.5%
- Interest Rate
- 6.75%
- Loan Term (years)
- 30 years
- Monthly Rental Income
- $2,800
- Vacancy Rate
- 5.0%
- Annual Operating Expenses
- $9,600
Results
- Cash-on-Cash Return
- 4.14%
- Annual Cash Flow
- $3,640
- Net Operating Income
- $22,320
- Monthly Mortgage Payment
- $1,557
- Cap Rate
- 6.98%
- Debt Service Coverage
- 1.19
- Total Cash Invested
- $88,000
Michelle — BRRRR Strategy in Memphis
Michelle follows the BRRRR strategy (Buy, Rehab, Rent, Refinance, Repeat) and is analyzing the post-refinance cash flow on a Memphis property. After rehab, the property appraises at $150,000. She refinanced with 25% down at 7% for 30 years, with 3% closing costs on the new loan. Monthly rent is $1,350. She uses 8% vacancy to account for the tenant transition after rehab. Operating expenses are $5,400/year.
Inputs
- Purchase Price
- $150,000
- Down Payment (%)
- 25%
- Closing Costs (%)
- 3.0%
- Interest Rate
- 7.00%
- Loan Term (years)
- 30 years
- Monthly Rental Income
- $1,350
- Vacancy Rate
- 8.0%
- Annual Operating Expenses
- $5,400
Results
- Cash-on-Cash Return
- 1.24%
- Annual Cash Flow
- $522
- Net Operating Income
- $9,504
- Monthly Mortgage Payment
- $748
- Cap Rate
- 6.34%
- Debt Service Coverage
- 1.06
- Total Cash Invested
- $42,000
Carlos — Single-Family in Columbus, OH
Carlos is analyzing a single-family rental in Columbus, OH, priced at $210,000. The property is in a strong rental neighborhood near Ohio State University with consistent demand. Monthly rent is $1,800. He’s using conventional 20% down financing at 6.25% for 30 years with 3% closing costs. Operating expenses are $6,000/year. Columbus has healthy rental demand with approximately 5% vacancy. He wants to compare this against his cap rate target of 7%.
Inputs
- Purchase Price
- $210,000
- Down Payment (%)
- 20%
- Closing Costs (%)
- 3.0%
- Interest Rate
- 6.25%
- Loan Term (years)
- 30 years
- Monthly Rental Income
- $1,800
- Vacancy Rate
- 5.0%
- Annual Operating Expenses
- $6,000
Results
- Cash-on-Cash Return
- 4.36%
- Annual Cash Flow
- $2,107
- Net Operating Income
- $14,520
- Monthly Mortgage Payment
- $1,034
- Cap Rate
- 6.91%
- Debt Service Coverage
- 1.17
- Total Cash Invested
- $48,300
Get the Free Rental Analysis Template
Download our Excel spreadsheet to analyze your own properties. Works with any rental property — just enter your numbers.
Frequently Asked Questions
What is a good cash-on-cash return for rental property? ▾
Most investors target 8-12% cash-on-cash return, though this varies by market and risk tolerance. In today's higher interest rate environment, 4-8% is more realistic for conventional financing. Markets with higher appreciation potential may justify lower cash-on-cash returns.
How is cash-on-cash return different from cap rate? ▾
Cap rate measures return on total property value ignoring financing. Cash-on-cash measures return on your actual cash invested, including the effects of leverage (mortgage). The same property can have very different cap rate and cash-on-cash return depending on financing terms.
Does cash-on-cash return include appreciation? ▾
No. Cash-on-cash return only measures annual pre-tax cash flow relative to cash invested. It does not account for property appreciation, principal paydown, or tax benefits. For a long-term projection including all returns, use our rental property investment projection calculator.
How does leverage affect cash-on-cash return? ▾
Leverage amplifies returns in both directions. With positive leverage (when the property yields more than the loan costs), a smaller down payment increases cash-on-cash return. With negative leverage, a smaller down payment worsens returns. This is why cash-on-cash can be very different from cap rate.
What closing costs should I include? ▾
Include all out-of-pocket costs at closing: loan origination fees, appraisal, title insurance, attorney fees, recording fees, transfer taxes, and prepaid escrow items. Typical total is 2-5% of the purchase price, though this varies by state and loan type.
Can cash-on-cash return be negative? ▾
Yes. Negative cash-on-cash means the property costs more to hold than it generates in income after debt service. This can happen with high-leverage purchases in markets where rents don't fully cover the mortgage. Some investors accept negative cash flow if they expect strong appreciation.
How does the DSCR relate to cash-on-cash return? ▾
Debt Service Coverage Ratio (DSCR) measures whether NOI covers the mortgage payment (DSCR > 1.0 means it does). Cash-on-cash goes further by measuring return on your total cash invested. A property can have DSCR above 1.0 but still deliver low cash-on-cash if you put a large down payment.
For informational and educational purposes only. Not financial advice. Full disclaimer.