Cash-on-Cash Return Calculator for Rental Property

How cash-on-cash return works

Cash-on-cash return compares the cash a rental earns in a year with the cash you actually put into the deal. It leaves out the part of the purchase the bank paid for, which is why investors use it to judge deals that use a loan.

Cash-on-cash return = annual pre-tax cash flow ÷ total cash invested

Annual cash flow is rent minus vacancy, operating costs, loan payments and your entered capital reserve, multiplied by twelve. Total cash invested is the down payment plus closing costs and cash-funded rehab; add any separate initial cash reserve to your own investment analysis.

With the numbers already filled in, the rental earns about $3,490 a year on $55,000 invested, which is a 6.3% cash-on-cash return.

What is a good cash-on-cash return?

There is no single right answer. Many investors look for high single digits or better, but the target depends on your market, your loan rate, how much work the property needs and how much appreciation you expect. A 5% return on a steady property can beat 12% on a risky one. Use the number to compare deals against each other, not to judge one deal alone.

Tips for getting accurate numbers

• Use rent from similar listings nearby, not the rent you hope to charge.
• Keep vacancy above zero, even in a strong market.
• Get real quotes for property taxes and insurance instead of guessing.
• Many landlords price in management even when they self-manage, so the deal still works if they hire help later.

What this calculator leaves out

• Principal paydown, the equity you build as you pay the loan
• Appreciation
• Income taxes and depreciation
• Actual major repairs beyond the capital replacement reserve you enter
• Rent increases or rising costs over time

Frequently asked questions

What is the difference between cash-on-cash return and cap rate?

Cap rate uses net operating income and the purchase price, so it ignores financing. Cash-on-cash uses cash flow after your loan payment and only the cash you invested. Cap rate helps compare properties. Cash-on-cash shows what your financing does to the deal. Read more in Cap Rate vs. Cash-on-Cash Return.

Should I include closing costs?

Yes. Closing costs are cash you spend to get the deal, so they belong in total cash invested along with rehab.

Can cash-on-cash return be negative?

Yes. If rent does not cover costs and the mortgage, cash flow is negative and the calculator shows a negative return.

Keep reading: Rental Property Cash Flow Calculator, DSCR Calculator, How to Analyze a Rental Property.

A zero cash investment makes cash-on-cash return undefined, so the calculator shows N/A. Percentages and costs must stay within the input limits. Replacement reserves start at zero; enter an amount appropriate for the property.