Cash-on-Cash Return Calculator

Cash-on-cash return answers a simple question: for every dollar I took out of my bank account to buy this property, how many cents come back each year? The formula is annual pre-tax cash flow ÷ total cash invested. Annual cash flow is rent collected, minus vacancy, operating expenses and the mortgage payment. Cash invested is the down payment plus closing costs and any upfront repairs or furnishing.

Unlike cap rate, cash-on-cash includes financing, so it shows the effect of leverage. A property with a 6% cap rate bought with 25% down and a loan below 6% can produce a higher cash-on-cash return than buying all-cash; with a loan rate above the cap rate, leverage works against you. If you need a mortgage figure, the mortgage calculator will give you principal and interest.

Many buy-and-hold investors look for 8–12% in the first year, but targets depend on the market and your goals. In expensive markets with strong appreciation, investors may accept 4–6%. In cheaper markets with less growth, they may want double digits to compensate. Compare the result with what the same cash could earn elsewhere with similar effort and risk, such as an index fund or a high-yield savings account.

The payback period — invested cash divided by annual cash flow — is the number of years until cash flow alone returns your money. It's a helpful sanity check: a 10% cash-on-cash return pays you back in about ten years before counting any appreciation or loan paydown.

You buy a rental with $50,000 down, $5,000 in closing costs and $5,000 of repairs: $60,000 invested. It rents for $2,000 a month; operating expenses are $600 and the mortgage is $1,000, so monthly cash flow is $400, or $4,800 a year. Cash-on-cash return is 4,800 ÷ 60,000 = 8.0%, and the payback period is 12.5 years. Add a 5% vacancy allowance and cash flow drops to $300 a month, bringing the return to 6%.