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Cash-on-Cash Return Calculator

Calculate the actual return on your down payment — annual net cash flow divided by total cash invested, with a tiered rating system.

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Cash-on-Cash

Enter your deal

Cash invested

$
%

DSCR min: 20–25%

$

Typical: 2–3%

$

Optional

Income & expenses

$
%

Typical: 5–8%

$

P&I + tax + ins + HOA

%

Mgmt, maintenance, capex

Results

Cash-on-Cash Return

9.22%

8–12% — strong

Strong cash-on-cash. Deal beats most passive alternatives. Look to scale.

Cash invested
Down payment
$62,500
Closing costs
$5,000
Total cash in
$67,500
Annual cash flow
Gross rent
$30,000
Less vacancy
($1,500)
Less other opex
($4,275)
Less annual PITIA
($18,000)
Net annual cash flow
$6,225
Monthly cash flow
$519

Cash-on-Cash = Annual Net Cash Flow ÷ Total Cash Invested. Unlike cap rate, CoC accounts for financing. It measures what your actual out-of-pocket dollars earn each year (the investor's return metric).

Cash-on-cash return tiers

CoC rangeRatingContext
< 5%WeakDoesn't justify illiquidity; better passive options exist
5–8%AcceptableWorks in appreciation markets; modest cash flow
8–12%StrongBeats most passive alternatives; good DSCR territory
12%+ExcellentVerify assumptions; achievable in strong cash-flow markets

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What is cash-on-cash return?

Cash-on-cash return answers the investor's most fundamental question: what does my actual out-of-pocket money earn each year? Unlike cap rate (which ignores financing), CoC accounts for leverage — the fact that you used a mortgage to amplify your returns.

CoC = Annual Net Cash Flow ÷ Total Cash Invested × 100

What counts as "total cash invested"?

Every dollar out of your pocket before the property starts generating stabilized income:

  • Down payment — the equity you bring to close
  • Closing costs — lender fees, title insurance, recording, escrow, appraisal (typical 2–3% of loan)
  • Rehab / repairs — any capital improvements before the property is rent-ready, even cosmetic work

Omitting closing costs or rehab inflates your apparent CoC. A deal that shows 14% CoC using just the down payment might be 9% CoC when you include the $8,000 you spent on paint, flooring, and appliances. Use the real number.

How annual net cash flow is calculated

  1. Start with gross annual rent
  2. Subtract vacancy loss (% × gross rent)
  3. = Effective gross income (EGI)
  4. Subtract other operating expenses (% of EGI — management, maintenance, CapEx)
  5. = NOI proxy
  6. Subtract annual PITIA (P&I + taxes + insurance + HOA × 12)
  7. = Annual net cash flow (what hits your bank account)

Worked example — Indianapolis SFR

Purchase price $220,000, 25% down ($55,000), closing costs $4,500, no rehab. Total cash in: $59,500. Gross annual rent $22,800 ($1,900/mo), vacancy 6%, opex 15% of EGI, PITIA $1,380/mo.

EGI = $22,800 × 0.94 = $21,432 → opex ($3,215) → NOI proxy: $18,217 → annual PITIA ($16,560) → annual cash flow: $1,657. CoC = $1,657 ÷ $59,500 = 2.8% — weak. This deal needs higher rent, lower PITIA (rate buydown or larger down), or a lower purchase price to work as a cash-flow investment.

How leverage amplifies CoC

The magic of leverage: if you buy a $220,000 property all-cash with a 6.5% cap rate, your CoC = 6.5% (same as cap rate, no leverage). If instead you put 25% down and finance the rest at 7.25%, you're earning the cap rate spread on borrowed money. When the cap rate is above your mortgage's effective cost, leverage boosts CoC. When rates are very high and cap rates compressed, leverage can actually hurt CoC — the "negative leverage" scenario common in 2022–2024.

Scenario Cap rate LTV Rate Approx. CoC
All cash7.0%0%—7.0%
25% down (positive leverage)7.0%75%6.5%~10%
25% down (neutral leverage)7.0%75%7.0%~7%
25% down (negative leverage)5.5%75%7.5%~1%

CoC vs DSCR — investor's lens vs lender's lens

These metrics answer different questions for different audiences:

  • DSCR — lender's question. "Will this property service its own debt?" Gross rent ÷ PITIA. Doesn't include vacancy or operating expenses. The lender doesn't care about your cash flow — they care about debt coverage.
  • Cash-on-cash — investor's question. "What return am I earning on my cash?" Net cash flow after all expenses and debt service ÷ total cash in. Includes vacancy, opex, and full PITIA.

A property can DSCR at 1.30 and still have negative CoC — if you overpaid or your operating expenses are very high. Always run both. DSCR qualifies the loan; CoC tells you if the deal makes financial sense.

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Frequently asked questions

What is cash-on-cash return?
Cash-on-cash (CoC) is the annual pre-tax cash flow divided by total cash invested. If you put $60,000 into a deal (down payment + closing costs + rehab) and net $5,400/year after all expenses and mortgage, your CoC is 9%. It's the investor's primary return metric — it measures what your actual dollars earn each year, accounting for leverage.
What's a good cash-on-cash return for a DSCR rental?
Context matters, but rough tiers: below 5% is weak and often fails to beat passive alternatives; 5–8% is acceptable in appreciation-heavy markets; 8–12% is strong and most experienced cash-flow investors target this range; 12%+ is excellent — achievable in strong secondary markets but verify your expense assumptions carefully.
How does cash-on-cash differ from cap rate?
Cap rate is unlevered (no mortgage) and property-level — it doesn't change based on financing. Cash-on-cash is levered and investor-level — it changes with every rate, LTV, and down payment scenario. Two investors can buy the same property at the same cap rate and get wildly different CoC returns depending on their loan terms.
Should I include rehab costs in total cash invested?
Yes — always include any capital deployed before the property is stabilized and generating income. Down payment + closing costs + rehab (even light cosmetic work) all count as cash invested. Omitting rehab inflates your apparent CoC return. The goal is an accurate picture of what your net wealth put to work is actually earning.
What operating expense percentage should I use?
The 'other opex %' field covers expenses not captured in PITIA: property management, maintenance, CapEx reserves, and any utilities you pay. A conservative rule of thumb for an SFR with a professional manager: 15–20% of EGI. For self-managed properties, some investors use 10%, but this understates future expenses. The 50% rule (total opex including PITIA = 50% of gross rent) is a quick rough check.
Why does my cash-on-cash look great on paper but terrible in practice?
The most common causes: (1) vacancy rate too low — use 5–8% minimum; (2) CapEx not included — factor in 5% of gross rent for capital repairs; (3) self-management not valued — plug in 8–10% management even if you're doing it yourself; (4) purchase price too close to ARV — if you paid market price without any value-add, your cash invested is higher relative to income.
Does CoC account for appreciation?
No. CoC is a current-year cash yield. It doesn't capture equity buildup from principal paydown, market appreciation, or forced appreciation through improvements. For a full return picture, use IRR (internal rate of return), which models all cash flows including eventual sale proceeds. Most DSCR investors target positive CoC as a floor and model appreciation as upside, not a requirement.
Is a negative cash-on-cash return ever acceptable?
For some investors, yes — particularly in gateway markets where appreciation has historically been strong. A 0% or slightly negative CoC in coastal California or New York may be acceptable if you have conviction in 5–8% annual appreciation. But it requires a specific investment thesis and the ability to fund any cash deficits from other income. For most DSCR rental investors, positive CoC is a hard requirement.
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