Rental Property Cash on Cash Return Calculator
(Taxes, Insurance, HOA, Repairs)
Investment Performance
Cash on Cash Return
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Annual Cash Flow
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Cap Rate
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Monthly Mortgage
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*Excludes principal paydown and appreciation.
Understanding Rental Property ROI
Investing in real estate requires precise calculations to ensure profitability. This Cash on Cash Return Calculator helps real estate investors evaluate the performance of a rental property based on the actual cash invested, rather than the total loan amount. It is one of the most critical metrics for buy-and-hold investors.
What is Cash on Cash Return?
Cash on Cash Return (CoC) measures the annual return the investor made on the property in relation to the amount of mortgage paid during the same year. It is considered a more accurate analysis of the investment's performance than standard ROI because it only accounts for the cash actually deployed (Down Payment + Closing Costs + Rehab Costs).
The Formula:
Cash on Cash Return = (Annual Pre-Tax Cash Flow / Total Cash Invested) × 100%
Key Metrics Explained
- Annual Cash Flow: This is your Net Operating Income (NOI) minus your annual debt service (mortgage payments). It represents the actual profit pocketed at the end of the year.
- Cap Rate (Capitalization Rate): This metric calculates the rate of return on a real estate investment property based on the income that the property is expected to generate. It disregards financing, allowing you to compare properties "apples-to-apples" regardless of how they are purchased.
- Net Operating Income (NOI): The total revenue from the property minus all necessary operating expenses. NOI excludes mortgage payments and taxes.
What is a Good Cash on Cash Return?
While "good" is subjective and depends on the local market and risk tolerance, many investors target a Cash on Cash return between 8% and 12%. In highly competitive markets, 5-7% might be acceptable if appreciation potential is high. Conversely, in riskier or lower-cost markets, investors may demand 15% or higher.
How to Improve Your ROI
If the calculator shows a return lower than your target, consider these strategies:
- Increase Rent: Are you charging market rates? Small increases can significantly boost NOI.
- Reduce Expenses: Shop around for cheaper insurance, appeal property taxes, or manage the property yourself to save management fees.
- Refinance: If interest rates have dropped, refinancing can lower your monthly mortgage payment, increasing cash flow.