Cash-on-Cash Return Calculator
Updated · By the CalculatorDash editorial team · How we check our maths
Quick answer
Cash-on-cash return = yearly pre-tax cash flow ÷ total cash invested. A $300,000 rental bought with 25% down and $9,000 of closing costs, renting for $2,600 a month with 40% expenses and a 7% mortgage, earns only about $760 a year on $84,000 invested: a 0.9% cash-on-cash return, even though the cap rate is 6.2%. That gap is exactly what this calculator is for.
How this calculator works
Cash-on-cash return answers the question investors actually care about: for every dollar I put in, how many cents come back each year as cash? It uses the cash flow left after operating expenses and mortgage payments, divided by the down payment plus closing and initial repair costs.
It differs from cap rate, which ignores financing and measures the property itself, and from total return, which also counts loan paydown, appreciation and tax benefits. A deal can have a low cash-on-cash return and still be a good long-term investment in a fast-appreciating area, or a high one that hides deferred maintenance.
The debt service coverage ratio (DSCR) shows how comfortably the rent covers the mortgage. Many investment-property lenders size the loan so DSCR stays above about 1.2.
The formula
- Net operating income
- rent × 12 × (1 − expense %)
- Cash flow
- NOI − yearly mortgage payments
- Cash-on-cash return
- cash flow ÷ (down payment + closing costs) × 100
- DSCR
- NOI ÷ yearly mortgage payments
Worked example
With 25% down on $300,000, the loan is $225,000 and payments at 7% over 30 years are about $17,960 a year. Rent of $31,200 less 40% expenses gives NOI of $18,720, so cash flow is about $760 a year on $84,000 invested: just 0.9%. At $2,900 a month rent it rises to about 3.5%.
Tips
- 01Use real expense numbers from the seller's records or local managers; 'rent minus mortgage' is never the cash flow.
- 02Compare cash-on-cash return with what the same money earns in a savings account or index fund.
- 03A bigger down payment raises the cash flow but often lowers the cash-on-cash percentage.
Frequently asked questions
What is a good cash-on-cash return?
Many investors look for 8–12%, but it depends on the market, interest rates and how much appreciation you expect.
Is cash-on-cash return the same as ROI?
It is one kind of ROI that only counts yearly cash flow. Total ROI also includes appreciation and loan paydown.
What is the difference between cap rate and cash-on-cash?
Cap rate ignores the mortgage and compares NOI to the price. Cash-on-cash includes the mortgage and compares cash flow to the cash you invested.