When investing in rental properties, understanding your Return on Investment (ROI) is crucial. Unlike a simple cap rate calculator, a Cash on Cash (CoC) Return Calculator focuses specifically on the money you actually paid out of pocket, rather than the total value of the asset. This makes it the most effective metric for investors who use leverage (mortgages) to acquire real estate.
How is Cash on Cash Return Calculated?
The formula is relatively straightforward but requires accurate inputs regarding your up-front costs and ongoing cash flow. The formula used in this calculator is:
Annual Cash Flow: This is your Gross Rental Income minus all expenses (Mortgage, Taxes, Insurance, HOA, Repairs, Vacancy). It is the net profit you put in your pocket every year.
Total Cash Invested: This is the total liquidity used to acquire the deal. It includes your Down Payment, Closing Costs, and any immediate Repair/Renovation costs.
What is a "Good" Cash on Cash Return?
While every investor has different goals, general market standards often dictate what constitutes a viable investment:
8% – 12%: Generally considered a solid return for most residential rental properties in stable markets. This outperforms the historical average of the stock market.
15%+: Considered an excellent return. These deals are often found in lower-cost markets or require significant "sweat equity" (renovations) to achieve.
Below 5%: Often considered weak for a pure cash-flow play, though investors might accept this in high-appreciation markets (like San Francisco or New York City) where the property value grows rapidly.
Why Use CoC Instead of Cap Rate?
The Capitalization Rate (Cap Rate) measures the return of a property as if you bought it entirely with cash. However, most investors use loans. Cash on Cash Return accounts for your debt service (mortgage payments), giving you a realistic picture of your actual yield on the dollars you moved from your bank account to the property.
Example Calculation
Imagine you buy a property for $200,000. You put $40,000 down and pay $5,000 in closing costs (Total Invested: $45,000).
Your tenant pays $1,800/month. After paying the mortgage ($900) and other expenses ($500), you have $400/month in pure profit.
Annual Cash Flow = $400 × 12 = $4,800
Total Invested = $45,000
CoC Return = ($4,800 / $45,000) = 10.66%
Use the calculator above to run your own scenarios and determine if your next rental property deal makes financial sense.
function calculateCoC() {
// 1. Get Input Values
var purchasePrice = parseFloat(document.getElementById("purchasePrice").value) || 0;
var downPayment = parseFloat(document.getElementById("downPayment").value) || 0;
var closingCosts = parseFloat(document.getElementById("closingCosts").value) || 0;
var monthlyRent = parseFloat(document.getElementById("monthlyRent").value) || 0;
var monthlyMortgage = parseFloat(document.getElementById("monthlyMortgage").value) || 0;
var monthlyOperating = parseFloat(document.getElementById("monthlyOperating").value) || 0;
// 2. Validate Inputs
if (downPayment === 0 && closingCosts === 0) {
// Avoid division by zero, but allow calculation if user is typing
return;
}
// 3. Perform Calculations
// Total Cash Invested = Down Payment + Closing/Rehab Costs
var totalCashInvested = downPayment + closingCosts;
// Monthly Expenses = Mortgage + Operating Expenses
var totalMonthlyExpenses = monthlyMortgage + monthlyOperating;
// Monthly Cash Flow = Rent – Total Expenses
var monthlyCashFlow = monthlyRent – totalMonthlyExpenses;
// Annual Cash Flow
var annualCashFlow = monthlyCashFlow * 12;
// Cash on Cash Return % = (Annual Cash Flow / Total Cash Invested) * 100
var cocReturn = 0;
if (totalCashInvested > 0) {
cocReturn = (annualCashFlow / totalCashInvested) * 100;
}
// 4. Update UI
var resultsBox = document.getElementById("cocResults");
resultsBox.style.display = "block";
// Format currency helper
var currencyFormatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
});
document.getElementById("displayTotalInvested").innerText = currencyFormatter.format(totalCashInvested);
document.getElementById("displayMonthlyCashFlow").innerText = currencyFormatter.format(monthlyCashFlow);
document.getElementById("displayAnnualCashFlow").innerText = currencyFormatter.format(annualCashFlow);
// Color coding for cash flow
var cashFlowEl = document.getElementById("displayMonthlyCashFlow");
if(monthlyCashFlow < 0) {
cashFlowEl.style.color = "#c0392b"; // Red
} else {
cashFlowEl.style.color = "#27ae60"; // Green
}
// Display Percentage
var percentageEl = document.getElementById("displayCoCPercentage");
percentageEl.innerText = cocReturn.toFixed(2) + "%";
// Contextual Commentary
var commentEl = document.getElementById("cocCommentary");
if (cocReturn < 0) {
percentageEl.style.color = "#c0392b";
commentEl.innerText = "Warning: This property has negative cash flow based on these numbers.";
} else if (cocReturn = 5 && cocReturn < 10) {
percentageEl.style.color = "#27ae60";
commentEl.innerText = "This is a decent return, typical for many stable markets.";
} else {
percentageEl.style.color = "#27ae60";
commentEl.innerText = "Excellent! This return exceeds the 10% benchmark many investors look for.";
}
}