Rental Property Cash on Cash Return Calculator
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Understanding Cash on Cash Return in Real Estate
When investing in rental properties, simply looking at the cap rate or gross yield doesn't tell the whole story. The Cash on Cash Return (CoC ROI) is widely considered the most important metric for real estate investors using leverage (mortgages). It measures the annual cash income earned on the property against the actual cash you invested, rather than the total property price.
How is Cash on Cash Return Calculated?
The formula for Cash on Cash Return is distinct from standard ROI because it accounts for financing. This calculator uses the following logic:
- Step 1: Determine Total Cash Invested. This includes your down payment, closing costs, and any immediate renovation or rehab costs required to get the property rentable.
- Step 2: Calculate Annual Pre-Tax Cash Flow. This is your total rental income minus all operating expenses (taxes, insurance, HOA fees, maintenance, vacancy) and debt service (mortgage payments).
- Step 3: Apply the Formula.
Cash on Cash Return = (Annual Pre-Tax Cash Flow / Total Cash Invested) × 100%
Why Use This Calculator?
Unlike a standard mortgage calculator, this tool focuses on investment performance. It helps you answer the critical question: "If I put $50,000 into this deal, what percentage return am I getting on that specific $50,000 annually?"
What is a "Good" Cash on Cash Return?
While target returns vary by market and investor strategy, here are general benchmarks for 2024:
- 8% – 12%: Generally considered a solid return in stable markets. This outperforms the historical average of the stock market while providing the added benefits of property appreciation and tax depreciation.
- 15%+: Excellent return, often found in lower-cost markets or properties requiring significant "sweat equity" (rehab work).
- Below 5%: Often considered risky unless the property is in a high-appreciation area (like major coastal cities) where investors rely on future value growth rather than immediate cash flow.
Factors Affecting Your ROI
Vacancy Rate: Always factor in a vacancy rate (typically 5-8%) into your monthly expenses. If your property sits empty for one month, your returns can drop significantly.
Maintenance & CapEx: Many new investors underestimate repair costs. Setting aside 10-15% of rent for repairs and capital expenditures (roof, HVAC replacement) ensures your calculated ROI is realistic over the long term.
Leverage: The power of real estate lies in leverage. By financing a property, you use less of your own money, potentially skyrocketing your Cash on Cash return compared to buying a property all-cash.
function validateInput(el) {
// Simple validation to prevent negative numbers
if (el.value < 0) el.value = 0;
}
function calculateRentalROI() {
// 1. Get Values
var price = parseFloat(document.getElementById("purchasePrice").value);
var down = parseFloat(document.getElementById("downPayment").value);
var closing = parseFloat(document.getElementById("closingCosts").value);
var rate = parseFloat(document.getElementById("interestRate").value);
var years = parseFloat(document.getElementById("loanTerm").value);
var rent = parseFloat(document.getElementById("monthlyRent").value);
var expenses = parseFloat(document.getElementById("monthlyExpenses").value);
// 2. Validate Inputs
if (isNaN(price) || isNaN(down) || isNaN(closing) || isNaN(rate) || isNaN(years) || isNaN(rent) || isNaN(expenses)) {
alert("Please fill in all fields with valid numbers.");
return;
}
// 3. Logic Implementation
// Loan Amount
var loanAmount = price – down;
if (loanAmount 0 && monthlyRate > 0) {
mortgage = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1);
} else if (loanAmount > 0 && monthlyRate === 0) {
mortgage = loanAmount / numberOfPayments;
}
// Total Monthly Cash Outflow
var totalMonthlyExpenses = mortgage + expenses;
// Cash Flow
var monthlyCashFlow = rent – totalMonthlyExpenses;
var annualCashFlow = monthlyCashFlow * 12;
// Total Cash Invested
var totalCashInvested = down + closing;
// Cash on Cash Return
var cocReturn = 0;
if (totalCashInvested > 0) {
cocReturn = (annualCashFlow / totalCashInvested) * 100;
}
// 4. Update UI
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2
});
document.getElementById("resTotalCash").innerHTML = formatter.format(totalCashInvested);
document.getElementById("resMortgage").innerHTML = formatter.format(mortgage);
document.getElementById("resTotalExp").innerHTML = formatter.format(totalMonthlyExpenses);
// Handle coloring for Cash Flow
var cfEl = document.getElementById("resMonthlyCF");
cfEl.innerHTML = formatter.format(monthlyCashFlow);
cfEl.style.color = monthlyCashFlow >= 0 ? "#27ae60" : "#c0392b";
var acfEl = document.getElementById("resAnnualCF");
acfEl.innerHTML = formatter.format(annualCashFlow);
acfEl.style.color = annualCashFlow >= 0 ? "#27ae60" : "#c0392b";
// Handle CoC Return
var cocEl = document.getElementById("resCoC");
cocEl.innerHTML = cocReturn.toFixed(2) + "%";
cocEl.style.color = cocReturn >= 0 ? "#27ae60" : "#c0392b";
// Show Results
document.getElementById("resultContainer").style.display = "block";
}