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What is Cash on Cash Return?
Cash on Cash (CoC) Return is a rate of return ratio used in real estate transactions that calculates the cash income earned on the cash invested in a property. Unlike ROI (Return on Investment), which might look at the total value of the asset including debt, CoC strictly measures the performance of the actual cash dollars you put into the deal.
Why Use this Calculator?
Real estate investors use this metric to compare the profitability of different rental properties relative to the capital required to purchase them. It answers the fundamental question: "For every dollar I put into this property, how many cents do I get back each year?"
The Formula
The calculation uses the following formula:
Cash on Cash Return = (Annual Pre-Tax Cash Flow / Total Cash Invested) x 100%
- Annual Cash Flow: (Monthly Rent – Mortgage – Expenses) × 12
- Total Cash Invested: Down Payment + Closing Costs + Rehab/Repair Costs
Example Calculation
Imagine you buy a property with the following numbers:
- Down Payment: $50,000
- Closing & Rehab: $15,000
- Total Invested: $65,000
- Monthly Cash Flow: $500 (Rent minus all expenses)
- Annual Cash Flow: $6,000 ($500 × 12)
In this scenario, your Cash on Cash Return is ($6,000 / $65,000) = 9.23%.
What is a "Good" Return?
While targets vary by investor and market, many real estate investors look for a Cash on Cash return between 8% and 12%. Returns above 15% are generally considered excellent, while anything below 5% might suggest the capital could be better utilized elsewhere, such as in the stock market or bonds.