Rental Property Cash on Cash Return Calculator
Acquisition Costs
Financing Details
Income & Expenses
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Property Performance
Total Cash Invested:
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Monthly Mortgage Payment:
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Total Monthly Expenses:
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Monthly Cash Flow:
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Annual Cash Flow:
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Cash on Cash Return:
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Understanding the Cash on Cash Return Calculator
Real estate investing is one of the most reliable ways to build wealth, but not every property is a good deal. To separate the winners from the losers, savvy investors rely on specific financial metrics. The most practical metric for immediate liquidity analysis is the Cash on Cash (CoC) Return.
This calculator helps you determine the annual return on the actual cash you invested, providing a clear picture of how hard your money is working for you compared to other investment vehicles like stocks or bonds.
How is Cash on Cash Return Calculated?
The formula for Cash on Cash Return is relatively straightforward, yet it captures the essence of leveraged investing. It is calculated as:
Cash on Cash Return = (Annual Pre-Tax Cash Flow / Total Cash Invested) × 100%
Let's break down the components used in our calculator:
- Annual Cash Flow: This is your net operating income minus debt service. It represents the profit you pocket at the end of the year after paying the mortgage, taxes, insurance, and maintenance.
- Total Cash Invested: This is the total capital you deployed to acquire the property. It includes your down payment, closing costs, and any immediate rehab or repair costs required to get the property rented.
Example Calculation
Imagine you are purchasing a rental property with the following numbers:
- Purchase Price: $200,000
- Down Payment: $40,000 (20%)
- Closing & Rehab Costs: $10,000
- Total Cash Invested: $50,000
After paying your mortgage and all expenses, let's say the property generates $300 per month in positive cash flow. That equals $3,600 per year.
Your Cash on Cash Return would be:
($3,600 / $50,000) × 100 = 7.2%
What is a "Good" Cash on Cash Return?
While answers vary based on market conditions and investor goals, here are general benchmarks for rental properties:
- 8% – 12%: Generally considered a solid return in most markets, outperforming average stock market returns while providing asset appreciation.
- 15%+: Considered an excellent return, often found in lower-cost-of-living areas or through value-add strategies (fixing up distressed properties).
- Below 5%: Might be acceptable in high-appreciation markets (like coastal cities) where the primary goal is long-term equity growth rather than immediate cash flow.
Why Not Just Use Cap Rate?
The Capitalization Rate (Cap Rate) measures the return of a property as if it were bought entirely with cash. While useful for comparing properties, it ignores the power of leverage (your mortgage). Since most investors use loans to buy real estate, Cash on Cash Return is often a more accurate reflection of the actual return on your specific equity investment.