Rental Property Cash on Cash Return Calculator
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Investment Analysis
Cash on Cash Return
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Monthly Cash Flow
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Annual Cash Flow
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Detailed Breakdown
Total Cash Invested
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Monthly Mortgage (P&I)
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Total Monthly Expenses
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Net Operating Income (Annual)
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Understanding Cash on Cash Return
Cash on Cash Return (CoC) is a metric widely used in real estate transactions to calculate the cash income earned on the cash invested in a property. Unlike standard Return on Investment (ROI), which might consider the total debt, CoC strictly measures the return on the actual cash you put out of pocket (down payment, closing costs, and repairs) relative to the annual pre-tax cash flow.
How Is Cash on Cash Return Calculated?
The formula for Cash on Cash Return is relatively straightforward:
Cash on Cash Return = (Annual Pre-Tax Cash Flow / Total Cash Invested) × 100
Where:
- Annual Pre-Tax Cash Flow: The gross rent minus all operating expenses (taxes, insurance, HOA, maintenance, vacancy) and debt service (mortgage payments).
- Total Cash Invested: The sum of your down payment, closing costs, and any initial renovation costs.
Why Use This Calculator?
Real estate investors use this metric to compare the profitability of different investment properties. It effectively answers the question: "If I put $50,000 into this deal today, how much cash will I get back this year?"
What is a Good Cash on Cash Return?
While "good" is subjective and depends on the market, many investors consider a CoC return of 8% to 12% to be solid. In highly appreciative markets, investors might accept lower cash flow (4-6%) in exchange for future equity growth, while in stable, lower-cost markets, investors often seek 12% or higher.
Factors Affecting Your Returns
- Vacancy Rate: Always account for potential vacancies. A 5-8% vacancy allowance is standard for residential rentals.
- Maintenance: Older homes generally require higher maintenance reserves (often 10-15% of rent) compared to new construction.
- Leverage: Financing a property usually increases your CoC return because you are using less of your own money to acquire the asset, provided the rent covers the mortgage.