Cash-on-Cash Return Calculator

What cash-on-cash return measures

Cash-on-cash return answers a simple question: for every dollar of your own money in a property, how many cents come back each year as cash? Unlike the cap rate, it includes your mortgage, so it shows the effect of financing on the money you actually invested.

Cash-on-cash return = yearly pre-tax cash flow ÷ total cash invested
Yearly cash flow = rent after vacancy − operating expenses − mortgage payments
Total cash invested = down payment + closing costs + repairs + other cash costs

Operating expenses are everything needed to run the property: property tax, insurance, repairs and maintenance reserve, capital expenditure reserve, management, HOA dues and owner-paid utilities. Enter them as one monthly total. The mortgage payment is principal plus interest; if your lender collects tax and insurance in escrow, include those in operating expenses instead, not in both places.

Worked example

An investor buys a $240,000 duplex with $60,000 down, pays $6,000 in closing costs and spends $10,000 on repairs, so $76,000 of cash goes in. The $180,000 loan at 6.75% for 30 years costs $1,167.48 a month. The two units rent for a total of $3,200 a month, vacancy is 5% and operating expenses are $950 a month.

• Rent after vacancy: $3,200 × 12 × 0.95 = $36,480.
• Operating expenses: $950 × 12 = $11,400; NOI = $25,080.
• Mortgage: $1,167.48 × 12 = $14,010.
• Cash flow: 25,080 − 14,010 = $11,070 a year, about $923 a month.
• Cash-on-cash return: 11,070 ÷ 76,000 = 14.57%; the cash flow alone repays the $76,000 in about 6.9 years.

Bought for cash instead ($240,000 price plus the same $6,000 closing and $10,000 repairs, $256,000 in total), the cash flow rises to $25,080 but the return falls to 9.80%. Here borrowing increases the return because the property earns more than the loan costs.

With 10% vacancy and $1,150 of monthly expenses, the financed return drops to 8.88% ($563 a month). Small changes in expenses have a large effect on the return of a leveraged property.

What is a good cash-on-cash return?

Investors set their own targets, often by comparing with what the same money could earn elsewhere with less work and risk. A rental also earns returns that cash-on-cash ignores, such as loan paydown and appreciation, so a lower cash-on-cash return can still be acceptable in an area where values are expected to grow. What matters is that the return is calculated on realistic expenses and still positive in a bad year.

Cash-on-cash versus ROI, cap rate and IRR

• Cap rate ignores financing; cash-on-cash includes it.
• ROI is used loosely; some people include equity build-up and appreciation, others only cash flow. Always check what a quoted ROI includes.
• IRR takes the timing of every cash flow and the eventual sale into account. The rental property calculator shows it for a hold period you choose.
• Cash-on-cash is a first-year snapshot. Rents, expenses and the loan change over time.

Mistakes that inflate cash-on-cash returns

• Leaving closing costs, loan fees or the repair budget out of the cash invested.
• Using zero vacancy, or skipping maintenance and capital expenditure reserves.
• Counting the principal part of the mortgage as cash flow. It builds equity but does not reach your bank account.
• Using a teaser or adjustable rate that will reset higher.

Results are before income tax. Depreciation and deductible expenses often reduce the tax on rental cash flow; see IRS Publication 527 or a tax professional.

Frequently asked questions

Sources

• Internal Revenue Service. Publication 527, Residential Rental Property.
• Consumer Financial Protection Bureau. What is an escrow or impound account?

Last reviewed 3 November 2026. Results are estimates; see our disclaimer.