Cash-on-Cash Return Calculator
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Cash-on-cash return = yearly pre-tax cash flow ÷ total cash invested. Buy a $300,000 rental with 25% down and $9,000 of closing costs; if it brings in $2,677 of cash flow a year after the mortgage, the return is 2,677 ÷ 84,000 = 3.19%.
Tax, insurance, repairs, management, HOA. Not the mortgage.
| Cash invested | |
| Down payment | $75,000 |
| Closing costs and repairs | $9,000 |
| Total cash invested | $84,000 |
| Yearly income | |
| Effective rent after vacancy | $29,640 |
| Operating expenses | -$9,000 |
| Net operating income | $20,640 |
| Mortgage payments ($1,497/mo) | -$17,963 |
| Cash flow | $2,677 a year, $223 a month |
| Returns | |
| Cash-on-cash return | 3.19% |
| Cap rate | 6.88% |
| DSCR | 1.15 |
Show steps
- Loan = $300,000 − $75,000 = $225,000; payment = $1,496.93 a month.
- NOI = $29,640 − $9,000 = $20,640.
- Cash flow = NOI − debt service = $20,640 − $17,963 = $2,677.
- Cash-on-cash = $2,677 ÷ $84,000 × 100 = 3.19%.
How to use the calculator
- Enter the price, down payment, closing costs and any repairs before renting.
- Enter the loan rate and term.
- Enter the rent, a vacancy allowance and yearly operating expenses, then press Calculate.
Formula
- Cash invested = down payment + closing costs + upfront repairs
- Cash flow = rent after vacancy − operating expenses − mortgage payments
- Cash-on-cash return = yearly cash flow ÷ cash invested × 100
Cash-on-cash vs cap rate
Cap rate (NOI ÷ price) ignores financing, so it compares buildings. Cash-on-cash return includes the mortgage, so it measures what your money earns. Borrowing raises cash-on-cash when the cap rate is higher than the loan’s cost, and lowers it when it is not. In the example, a 6.88% cap rate with a 7% mortgage gives only a 3.19% cash-on-cash return; paying cash would give 6.88%.
Cash-on-cash return practice questions
Test yourself with 6 multiple-choice questions. Choose an answer and press Submit to see if you are right and why. Your score appears at the end.
It is the money that came out of your pocket to buy and prepare the property.
Principal paydown builds equity but is not cash in hand, so it is left out.
Quiz complete
Frequently asked questions
What is a good cash-on-cash return?
Investors often aim for 8% to 12%, but targets depend on the market, risk and how much appreciation is expected. Compare it with what the same cash could earn elsewhere.
Is cash-on-cash return the same as ROI?
It is a type of ROI that only counts yearly cash flow. A full ROI may also include principal paydown, appreciation and the sale price.
Does cash-on-cash include taxes?
It is usually calculated before income tax. Depreciation and other deductions can make after-tax returns higher.
Why can cash-on-cash be negative?
If the rent does not cover operating costs and the mortgage, cash flow is negative, so the return is below 0.
Sources
- Consumer Financial Protection Bureau: Understanding loan estimates
- IRS Publication 527: Residential rental property
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