Cash-on-Cash Return Calculator

Cash-on-cash return answers the question every real estate investor actually cares about: given everything I had to put in out of pocket to close this deal, how much am I earning on that cash each year? It divides your annual net cash flow — after operating expenses and mortgage payments — by the total cash you invested upfront. Unlike cap rate, which strips out financing entirely, cash-on-cash is a leveraged return that reflects how your mortgage affects your overall profitability.

The key difference between cash-on-cash return and cap rate comes down to debt. Cap rate measures what a property earns as if you owned it free and clear. Cash-on-cash measures what your specific investment structure earns — incorporating the cost and benefit of your mortgage. If you finance at a rate lower than the cap rate, positive leverage amplifies your cash-on-cash return above the cap rate. If financing costs more than the property earns, negative leverage drags it down.

Total cash invested must capture every dollar you put in before the property starts generating rent. This includes your down payment (typically 20–25% for investment properties), closing costs (roughly 2–5% of purchase price), and any upfront renovation or repair costs needed to make the property rent-ready. Leaving any of these out overstates your return. The financed portion of the purchase price is not included — only the cash that left your account.

Typical benchmarks vary by investment strategy. Buy-and-hold investors in appreciating urban markets often accept 4–7% cash-on-cash in exchange for long-term value growth. Value-add investors — those buying distressed properties, renovating, and repositioning — typically target 8–12% or higher to justify the additional effort and risk. Properties generating above 12% cash-on-cash often involve significant leverage, a below-market purchase, or are located in higher-risk secondary and tertiary markets.

Cash-on-cash has one important limitation: it looks only at current income and ignores equity builddown from mortgage paydown and property appreciation. A property with a modest 6% cash-on-cash return in a high-appreciation market may outperform a 10% cash-on-cash property in a stagnant market over a five-year hold. For a full rental property analysis that includes appreciation, equity, and IRR, use our rental property investment analyzer.