Rental Property Cash on Cash Return Calculator
1. Purchase & Loan Details
2. Rental Income
3. Recurring Monthly Expenses
Investment Analysis
Cash on Cash Return
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Monthly Cash Flow
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Cap Rate
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Total Monthly Expenses
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Monthly Mortgage P&I
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Net Operating Income (NOI)
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Understanding Rental Property Returns
Investing in real estate requires more than just buying a property and collecting rent. To determine if an asset is a viable investment, you must analyze key financial metrics. This Rental Property Calculator focuses on the three most critical indicators for investors: Cash Flow, Cash on Cash Return (CoC), and Capitalization Rate (Cap Rate).
1. Cash on Cash Return (CoC)
Formula: (Annual Pre-Tax Cash Flow / Total Cash Invested) × 100
This is arguably the most important metric for leveraging investors. It measures the return on the actual cash you put into the deal (Down Payment + Closing Costs + Rehab), rather than the total price of the property. A generic rule of thumb for many investors is to aim for a CoC return of 8-12% or higher, depending on the risk profile of the neighborhood.
2. Net Operating Income (NOI) vs. Cash Flow
Many beginners confuse these two metrics:
- NOI (Net Operating Income): This represents the profitability of the property excluding debt service (mortgage). It is calculated as Total Income minus Operating Expenses (Taxes, Insurance, Maintenance, Vacancy, Management).
- Cash Flow: This is what ends up in your pocket. It is calculated as NOI minus Debt Service (Mortgage Principal & Interest).
3. Real World Example
Let's say you buy a property for $200,000 with $50,000 down. After closing costs, your total cash invested is $55,000.
- Income: $2,000/month rent.
- Expenses: $800/month (Taxes, Insurance, Maintenance).
- Mortgage: $900/month.
- Cash Flow: $2,000 – $800 – $900 = $300/month ($3,600/year).
- Cash on Cash Return: ($3,600 / $55,000) = 6.54%.
Tips for Improving ROI
If the numbers in the calculator above aren't meeting your investment criteria, consider these adjustments:
- Reduce Vacancy: High-quality tenant screening reduces turnover time.
- Value Add: Minor renovations can justify higher rent prices.
- Refinance: If interest rates drop, refinancing can lower your monthly debt service, instantly boosting cash flow.