Cash on Cash Return Calculator

Cash on cash return formula

Annual pre-tax cash flow is rent collected minus operating expenses minus mortgage payments. Total cash invested is everything you paid out of pocket: down payment, closing costs, rehab, and other upfront costs.

Example

You buy a duplex with $75,000 down, $9,000 in closing costs and $6,000 of repairs, for $90,000 of cash invested. The property collects $28,500 a year after vacancy, costs $10,500 to operate, and the mortgage is $18,400 a year. Cash flow is $28,500 − $10,500 − $18,400 = −$400, so cash on cash return is slightly negative. Raise rent by $100 a month and cash flow becomes $800, a 0.9% return.

What is a good cash on cash return?

Many investors target 8% to 12% for buy-and-hold rentals, since that beats what a diversified stock index has historically paid in dividends and leaves room for surprises. In high-appreciation markets 4% to 6% is common. Compare it to your alternatives: if a high-yield savings account pays 4%, a rental that returns 3% in cash needs strong appreciation to justify the extra work and risk.

Cash on cash return vs ROI vs cap rate

• Cap rate ignores financing and measures the property's income yield.
• Cash on cash return includes financing and measures the cash yield on your cash.
• Total ROI adds principal paydown, appreciation and tax benefits, so it's usually higher than cash on cash return.

Because cash on cash return only counts cash flow, it's the best measure of how much spendable income a property produces in year one.

Frequently asked questions

Last reviewed: 2026-10-09