Cash-on-Cash Return Calculator

Cash-on-cash return (CoC) measures the annual pre-tax cash income you actually receive relative to the total cash you invested.
Not the property value, not the mortgage balance, just cash in against cash out. It is the most practical metric for rental property investors who use leverage (mortgages).

Formula: Cash-on-Cash Return (%) = (Annual Pre-Tax Cash Flow ÷ Total Cash Invested) × 100

Annual Pre-Tax Cash Flow: Cash Flow = Gross Rental Income − Vacancy Loss − Operating Expenses − Debt Service (mortgage payments)

Total Cash Invested: Cash Invested = Down Payment + Closing Costs + Initial Repairs + Reserves

Variable definitions:

• Gross Rental Income: total rent if 100% occupied for 12 months
• Vacancy Loss: typically 5–10% of gross rent (market dependent)
• Operating Expenses: property taxes, insurance, management fees (~8–12% of rent), maintenance, HOA
• Debt Service: annual principal + interest payments on any mortgage
• Down Payment: cash paid upfront (typically 20–25% for investment properties)
• Closing Costs: title, inspection, lender fees (~2–4% of purchase price)

CoC vs. Cap Rate: key distinction:

• Cap Rate ignores financing, useful for comparing properties on equal footing
• Cash-on-Cash includes your specific loan terms, measures YOUR actual return on YOUR cash

Benchmark targets:

• Negative: the property costs you money each month, so the case for owning it rests entirely on appreciation and tax treatment
• Below 4%: poor, index funds typically outperform
• 4–8%: acceptable in a high-appreciation market
• 8–12%: solid performing rental property
• 12% and above: excellent, usually a lower-cost market or a value-add improvement

Worked example: Purchase price: $250,000. Down payment (25%): $62,500. Closing costs: $4,500. Repairs: $3,000. Total Cash Invested = $70,000

• Monthly rent: $2,000 → Annual gross: $24,000
• Vacancy (7%): −$1,680
• Property taxes: −$2,500
• Insurance: −$1,200
• Management (10%): −$2,400
• Maintenance: −$1,200
• Mortgage P+I (6.5% on $187,500, 30yr): $1,185.13/month, so −$14,222/year
• Annual Cash Flow = $24,000 − $1,680 − $2,500 − $1,200 − $2,400 − $1,200 − $14,222 = $798

Cash-on-Cash = ($798 ÷ $70,000) × 100 = 1.14%

The property barely cash-flows, and that is the point of the example. Sixty-six dollars and change a month is not a margin, it is a rounding error: one furnace, one bad tenant, one month vacant and the year is negative. Run the full numbers before buying, and be honest about the maintenance line in particular, since $100 a month does not cover a roof.