Cash-on-Cash Return Calculator
See the pre-tax cash return on your invested cash. No sign-up, formula shown.
Updated · By Teodor-Cristian Lutoiu
Cash-on-cash return = annual pre-tax cash flow ÷ total cash invested (down payment + closing + rehab). A 6–10% return is typical for long-term rentals; 12%+ usually means either a strong deal or a market with higher risk. Cash-on-cash ignores appreciation and loan paydown — both real returns, both outside this metric.
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How cash-on-cash return works
Cash-on-cash return (CoC) is how rental property investors compare deals apples-to-apples. It answers one question: for every dollar of my own money I put into this deal, how many dollars come back to me each year as cash?
The formula is short:
CoC % = Annual Pre-Tax Cash Flow ÷ Total Cash Invested
"Cash flow" here means rent minus operating expenses minus debt service — before any tax adjustments, principal paydown, or appreciation. "Cash invested" means the money that actually left your bank account: down payment, closing costs, and any upfront repairs to get the property rent-ready.
What CoC does not measure:
- Principal paydown equity. Every mortgage payment reduces your loan balance. That's equity gain, not cash flow, so it doesn't show here. A property with 6% CoC might actually be growing your net worth at 10-12% when you count paydown.
- Appreciation. If the home goes up 4% a year, that's another big chunk of total return that CoC ignores.
- Tax benefits. Depreciation is a big write-off for real estate investors. CoC is pre-tax; your after-tax return is often higher.
So CoC is a narrow metric. It tells you whether the property cash flows on day one. It does not tell you whether you'll be richer in 20 years.
What a "good" CoC looks like depends on the market and your goal. Investor rules of thumb in 2026:
- 8%+ — solid in most non-coastal US markets for a standard long-term rental
- 6–8% — acceptable in higher-cost markets where you're partly betting on appreciation
- 10%+ — what you should aim for on short-term rentals and small multi-family to compensate for higher risk and management burden
- Below 5% — only makes sense if you're confident in significant appreciation or are using the property personally part of the time
Formula
monthly_cash_flow = rent − expenses − mortgage_P_and_I
annual_cash_flow = monthly_cash_flow × 12
coc_return = annual_cash_flow ÷ total_cash_invested
Three definitions that matter:
- Expenses — all recurring operating costs: property tax, homeowners/landlord insurance, HOA, property management fee, maintenance reserve, vacancy allowance (usually 5-8% of gross rent), and utilities if landlord-paid. Not the mortgage — that's counted separately.
- Mortgage P&I — principal + interest only. Exclude the escrow portion (tax + insurance) because you're already counting those in expenses above. Double-counting will understate your true cash flow.
- Cash invested — down payment + all closing costs (origination, title, appraisal, recording) + initial repair/rehab costs to get the property rent-ready.
Scenarios at a glance
Same $250,000 rental, $50,000 down + $10,000 closing ($60,000 cash invested), $1,800 monthly rent, different monthly operating costs:
| Monthly expenses | Monthly cash flow | Annual cash flow | CoC return |
|---|---|---|---|
| $1,200 | $600 | $7,200 | 12.0% (strong deal) |
| $1,500 | $300 | $3,600 | 6.0% (market average) |
| $1,700 | $100 | $1,200 | 2.0% (marginal) |
Small changes in operating expenses swing CoC return far more than people expect — always underwrite at a realistic number including vacancy and maintenance reserves, not just mortgage.
Worked example
Marcus buys a single-family rental in a Midwest suburb:
- Purchase price: $240,000
- Down payment: $48,000 (20%)
- Closing costs: $6,000
- Initial paint + flooring: $6,000
- Cash invested: $60,000
After renting it out:
- Monthly rent: $2,200
- Monthly expenses (tax $300 + insurance $100 + maintenance reserve $150 + vacancy $50): $600
- Monthly mortgage P&I (on $192k @ 6.75%, 30yr): $1,245
Run the numbers:
- Monthly cash flow = $2,200 − $600 − $1,245 = $355
- Annual cash flow = $355 × 12 = $4,260
- Cash-on-cash return = $4,260 ÷ $60,000 = 7.1%
7.1% is decent for 2026 in a non-premium market. Marcus also gets mortgage paydown (~$2,200/yr of principal reduction in year one) and whatever appreciation the market provides, neither of which shows up in CoC.
FAQ
Is cash-on-cash the same as cap rate?
No. Cap rate = Net Operating Income ÷ Purchase Price. It ignores financing — it's what the property earns if you bought it all cash. Cash-on-cash = Annual Cash Flow ÷ Cash Invested. It includes your mortgage. If you're buying with financing, CoC is the more useful number for your decision.
Should I use gross rent or net rent?
Gross rent (what the tenant pays you). The calculator subtracts operating expenses separately, so don't pre-subtract them from rent.
Should I include property management fees in expenses?
Yes, if you're paying a property manager. Even if you're self-managing, many investors include a 8–10% placeholder so the deal still cash flows when they eventually hand it off.
What about vacancy?
Build it in. Industry rule of thumb: 5-8% of gross rent for a standard long-term rental, 15-25% for short-term rentals. Enter it as part of monthly expenses.
How do I handle one-time repair costs that happen occasionally?
Reserve for them monthly. If the roof has 15 years left and will cost $12,000, set aside $67/mo ($12,000 ÷ 180 months). Add that to your monthly expenses.
Does this work for commercial or multi-family?
Math is identical. Just make sure "monthly rent" is total rental income across all units, and "expenses" captures the full cost of running the building — common area maintenance, landlord insurance, and so on.
Last updated: April 23, 2026