When investing in rental properties, knowing your Cash on Cash (CoC) Return is arguably more important than standard ROI. Unlike a stock market investment where you pay 100% of the cost upfront, real estate allows you to use leverage (a mortgage). The Cash on Cash Return calculator above helps you determine the percentage return on the actual cash you put into the deal, not the total property value.
How is Cash on Cash Return Calculated?
The formula for Cash on Cash return is straightforward but powerful. It looks at your pre-tax cash flow relative to the capital you invested:
Annual Pre-Tax Cash Flow: This is your Gross Rent minus all operating expenses (taxes, insurance, HOA, repairs, vacancy) and minus your annual mortgage debt service. Total Cash Invested: This includes your Down Payment, Closing Costs, and any immediate Rehab/Renovation costs.
Why Use a Rental Property Calculator?
Real estate investors use calculators to quickly screen properties. A "good" deal depends on your goals, but calculating the numbers removes emotion from the decision. By inputting your purchase price ($250,000 example), interest rate, and projected rent, you can immediately see if a property will be "cash flow positive."
What is a "Good" Cash on Cash Return?
While this varies by market and investor strategy, generally:
8-12%: Often considered a solid return for passive buy-and-hold investors.
15%+: Considered excellent, though often requires more active management or finding off-market deals.
Below 5%: Might be acceptable in high-appreciation markets (like coastal cities) where the long-term equity growth outweighs immediate cash flow.
Factors That Kill Your ROI
When using this calculator, ensure you are not underestimating expenses. Beginners often forget:
Vacancy Rates: You won't collect rent 12 months a year forever. Assume 5-8% vacancy.
Maintenance: Roofs leak and toilets break. Set aside 5-10% of rent for repairs.
Property Management: If you don't manage it yourself, deduct 8-10% for a management fee.
Use the "Monthly Operating Expenses" field in the calculator above to account for these hidden costs to get an accurate Cash on Cash return percentage.