Cash-on-Cash Return Calculator
What your own money earns in year one — counting every dollar you put in, not just the down payment.
Purchase
Financing
Income
Fixed expenses
Assumptions
Reserves you do not spend every month are still costs. Drag them to zero to see what the optimistic version of this deal looks like.
Appreciation starts at 0% on purpose. It is a forecast, not a return you have earned.
Cash-on-cash return
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Select a payment structure to compute.
Results
| Gross scheduled income | — |
|---|---|
| Less vacancy | — |
| Effective gross income | — |
| Operating expenses | — |
| Net operating income | — |
| Annual debt service | —Select a payment structure |
| Annual cash flow | —Select a payment structure |
| Cash invested | — |
| Cash-on-cash return | —Select a payment structure |
| Cap rate | — |
| DSCR | — |
| Year-one principal paydown | — |
| Year-one appreciation | — |
| Total first-year return | —Select a payment structure |
| Expense ratio | — |
| Break-even occupancy | —Select a payment structure |
| Rent to price | — |
Estimates only, based on the assumptions shown above. Actual returns depend on real vacancy, real repair costs, real rent growth, financing terms at close, and taxes — none of which this tool can know. Not a loan commitment, an offer of credit, or investment advice.
The denominator is where this goes wrong
Cash-on-cash return is a simple ratio: the cash the property puts in your pocket over a year, divided by the cash you put into it to begin with. Both halves are routinely computed wrong, and the denominator is the worse offender.
Most people divide by the down payment. On the scenario above that is $62,500 — but the actual cash that left the account was $85,375, once you add $6,000 of closing costs, $15,000 of upfront rehab and $1,875 in points. Dividing by the down payment alone inflates the return by more than a third. It is not a small correction, and it is entirely self-inflicted.
The rule is simple: if the money came out of your account to acquire the property, it belongs in the denominator. If you financed it, it does not. A rehab rolled into the loan is not cash invested; a rehab you paid for is.
The more interesting question is what leverage is doing to the number. Cash-on-cash is a levered return, which is exactly what distinguishes it from cap rate — and leverage does not reliably improve it. It helps only when the cost of the debt is below what the property earns unlevered. When your loan constant runs above the cap rate, every extra dollar borrowed drags cash-on-cash down while simultaneously increasing your risk. That is the worst of both.
Try it above. Change the down payment from 25 percent to 40 and watch which direction the return moves. Whether it rises or falls tells you something specific about this deal at this rate — whether debt is working for you or against you — and it is a question a cap rate can never answer, because a cap rate does not know you have a loan.
Finally, note what cash-on-cash deliberately ignores. It does not count principal paydown, which is real money but locked up until you sell or refinance. It does not count appreciation, which is a forecast rather than a return. And it does not count depreciation, whose value depends entirely on your own tax position. All of that is why cash-on-cash tends to look modest next to the returns quoted in real estate marketing — those numbers usually include everything, and this one deliberately does not. If you want the fuller picture, the total-return line on this page adds cash flow, paydown and appreciation together. Just be clear which number you are looking at when you compare two deals, because most people are not.
Methodology
- Cash-on-cash = annual cash flow ÷ cash invested × 100.
- Cash invested = down payment + closing costs + upfront rehab + origination points.
- Annual cash flow = net operating income less annual debt service, where net operating income is rent and other income, less vacancy, less every operating expense including maintenance, CapEx reserve and management.
- Cap rate = net operating income ÷ (purchase price + rehab). Unlevered, so it does not move when you change the financing.
- Total first-year return = (cash flow + year-one principal paydown + year-one appreciation) ÷ cash invested. Principal paydown is the balance retired over the first twelve payments.
Appreciation defaults to 0 percent. It is a forecast, not an earned return, and defaulting it higher would inflate total return on every deal this page renders.
Excluded: income tax, depreciation, rent growth, expense inflation, and selling costs. Currency is computed in exact integer cents, including the amortization exponential, so a 30-year term accumulates no rounding drift.
Frequently asked questions
- How do you calculate cash-on-cash return?
- Annual pre-tax cash flow divided by the total cash you put into the deal, expressed as a percent. The cash flow half is rent less every operating expense less the loan payment. The cash invested half is the down payment plus closing costs plus any upfront rehab plus origination points — not just the down payment.
- What counts as cash invested?
- Every dollar that left your account to acquire the property. Down payment, closing costs, upfront rehab, and loan points. People routinely count only the down payment, which on a typical deal understates the investment by 25 to 35 percent and overstates the return by the same proportion. If you borrowed the rehab money, it is not cash invested; if you paid it, it is.
- What is the difference between cash-on-cash return and cap rate?
- Cap rate is unlevered: net operating income divided by the property price, ignoring how you paid for it. Cash-on-cash is levered: cash flow after the loan payment, divided by your own money. Cap rate describes the property. Cash-on-cash describes your position in it. Two investors buying the identical building at the identical price have the same cap rate and can have wildly different cash-on-cash returns.
- Does more leverage always increase cash-on-cash return?
- No — it increases it only when your borrowing cost is below the property's unlevered return. When the loan constant exceeds the cap rate, every additional dollar borrowed lowers cash-on-cash rather than raising it, and it raises risk at the same time. At today's rates against typical cap rates, that condition is common. Change the down payment above and watch which direction the number moves.
- Is a good cash-on-cash return 8%? 10%?
- There is no universal threshold, and any specific number you see quoted is a market and a moment rather than a rule. What matters more is what you are comparing against: a rate of return you could get passively with no tenants, no repairs and no liquidity risk. If a rental returns two points more than that, you are being paid two points to take on a second job.
- Does cash-on-cash include appreciation or principal paydown?
- No, and that is deliberate. Cash-on-cash measures only cash that actually reaches you this year. Principal paydown is real but illiquid until you sell or refinance, and appreciation is a forecast. Both are shown separately on this page, and the total-return line adds all three — but keeping them apart is what makes cash-on-cash the honest near-term number.
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