property calculator

Cash-on-Cash Return Calculator

Annual pre-tax cash flow over cash invested, shown next to cap rate and debt service coverage ratio.

Cash-on-Cash Return = Annual Pre-Tax Cash Flow ÷ Total Cash Invested × 100, where cash flow is net operating income minus debt service and cash invested is down payment plus closing costs plus rehab. Example: $8,950 of cash flow on $77,500 invested is 11.55%, against an 8–12% commonly cited target range.

Formula Verified by Dr. Thomas Wright, PhD

Quick actions: Save inputs, view saved runs, print, share, or export results

Saved Runs

Inputs

Purchase Price$

Down Payment%

Closing Costs$

Rehab / Make-Ready Costs$

Gross Annual Rent$

Vacancy Rate%

Other Annual Income (parking, laundry, fees)$

Annual Operating Expenses (excluding mortgage)$

Annual Debt Service (principal + interest)$

Results

Cash-on-Cash Return

11.55%

Total Cash Invested$77,500

Down Payment$62,500

Vacancy Loss$1,650

Effective Gross Income$31,350

Net Operating Income$20,350

Annual Cash Flow (pre-tax)$8,950

Monthly Cash Flow$746

Cap Rate (unleveraged)8.14%

Debt Service Coverage Ratio1.79

Operating Expense Ratio35.1%

Tip

Run it on every deal before you offer, and again on the ones you own each time rents, taxes, or insurance move.

Formula

Cash-on-cash return formula

Total Cash Invested = Down Payment + Closing Costs + Rehab Costs
Effective Gross Income = Gross Rent − Vacancy Loss + Other Income
Net Operating Income = Effective Gross Income − Operating Expenses
Annual Cash Flow = Net Operating Income − Annual Debt Service
Cash-on-Cash Return = Annual Cash Flow ÷ Total Cash Invested × 100

Cap Rate = Net Operating Income ÷ Purchase Price × 100
DSCR = Net Operating Income ÷ Annual Debt Service

Cash-on-cash measures the return on the money you actually put in, which is why it is the metric leveraged investors use: it counts the mortgage, where cap rate deliberately ignores it. The two are shown side by side because the gap between them is the effect of the financing, and a deal with a respectable cap rate and a negative cash-on-cash return is entirely possible — that is a debt problem, not a property problem, and the DSCR is where it shows up first.

Step by step

How the calculation works

1Total cash invested is the whole amount out of your pocket to get the property producing — down payment, closing costs, and any rehab or make-ready work. Leaving rehab out is the most common way this metric gets inflated: money spent before the first tenant moves in is invested capital, not an expense.
2Enter gross annual rent and a realistic vacancy rate. Five percent is a common planning figure in a stable market, but check local data rather than assuming — vacancy is where optimistic underwriting usually starts.
3Operating expenses cover property taxes, insurance, management, maintenance, repairs, HOA dues, and any utilities you pay. They do not include the mortgage: that is debt service, entered separately, and mixing the two is the single most frequent error in rental analysis. A useful sanity check is the operating expense ratio this calculator reports — for a typical single-family rental it commonly lands somewhere around 35–50% of effective gross income, and a figure far below that usually means something has been left out.
4Annual debt service is twelve months of principal and interest. Because it includes principal, part of your "cost" is actually equity accumulating — which is why cash-on-cash understates total return, and why it should be read alongside the appreciation and amortisation this calculator does not model.
5For context on what the numbers mean, 8–12% is a commonly cited target range for cash-on-cash on a residential rental, though what is achievable varies enormously by market and by how much leverage you use. To build the operating-expense figure properly, the [net operating income calculator](/calculators/net-operating-income-calculator) works through it line by line; for the whole-deal picture including appreciation, the [rental property ROI calculator](/calculators/rental-property-roi-calculator) goes further.

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Net Operating Income Calculator

Build the NOI figure line by line before it feeds a cash-on-cash calculation.

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Rental Property ROI Calculator

Add appreciation, amortisation, and tax effects for a total-return view.

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Rental Yield Calculator

Compare gross and net yield against the leveraged return calculated here.

property calculator

Cash-on-Cash Return Calculator

Annual pre-tax cash flow over cash invested, shown next to cap rate and debt service coverage ratio.

Formula Verified by Dr. Thomas Wright, PhD

Quick actions: Save inputs, view saved runs, print, share, or export results

Saved Runs

Inputs

Purchase Price$

Down Payment%

Closing Costs$

Rehab / Make-Ready Costs$

Gross Annual Rent$

Vacancy Rate%

Other Annual Income (parking, laundry, fees)$

Annual Operating Expenses (excluding mortgage)$

Annual Debt Service (principal + interest)$

Results

Cash-on-Cash Return

11.55%

Total Cash Invested$77,500

Down Payment$62,500

Vacancy Loss$1,650

Effective Gross Income$31,350

Net Operating Income$20,350

Annual Cash Flow (pre-tax)$8,950

Monthly Cash Flow$746

Cap Rate (unleveraged)8.14%

Debt Service Coverage Ratio1.79

Operating Expense Ratio35.1%

Tip

Run it on every deal before you offer, and again on the ones you own each time rents, taxes, or insurance move.

Summary

Key output metrics

Cash-on-Cash Return

11.55%

$8,950 on $77,500 invested

Monthly Cash Flow

$746

NOI $20,350 − debt service $11,400

DSCR

1.79

Above the usual lender floor

D3 visualization

From Gross Rent to Cash Flow

Where the rent goes. Vacancy and operating expenses produce net operating income; debt service turns that into what actually reaches your pocket.

Guide

How to understand and use this calculator

Quick Answer — How Do You Calculate Cash-on-Cash Return?

Divide the annual pre-tax cash flow by the total cash you put into the deal: CoC = (Annual Pre-Tax Cash Flow)/(Total Cash Invested) × 100. Cash flow is net operating income minus debt service; cash invested is the down payment plus closing costs plus any rehab needed to make the property rentable.

The chain from rent to return, in order:

Effective Gross Income = Gross Rent − Vacancy Loss + Other Income
Net Operating Income = Effective Gross Income − Operating Expenses *(mortgage excluded)*
Annual Cash Flow = Net Operating Income − Annual Debt Service
Cash-on-Cash Return = Annual Cash Flow ÷ Total Cash Invested

Worked example: a $250,000 property with 25% down ($62,500), $7,000 closing and $8,000 rehab, renting for $33,000 a year at 5% vacancy, with $11,000 of operating expenses and $11,400 of annual debt service. Cash invested = $77,500. Effective gross income = $31,350. NOI = $20,350. Cash flow = $8,950. Cash-on-cash = 8,950 ÷ 77,500 = 11.55%.

A commonly cited target range for residential rentals is 8–12%, though what is achievable varies enormously by market and by how much leverage you use. The metric's whole point is that it counts the mortgage — which is exactly what cap rate deliberately ignores.

How to Use This Calculator: A Financed Single-Family Rental

Enter the purchase price and down payment percentage, then add every other dollar that leaves your account before the first tenant moves in. For the example above: down payment $62,500, closing costs $7,000, rehab $8,000, for $77,500 of invested capital.

On the income side, $33,000 of gross rent less a 5% vacancy allowance of $1,650 gives $31,350 of effective gross income. Subtract $11,000 of operating expenses — taxes, insurance, management, maintenance, and reserves, but *not* the mortgage — and net operating income is $20,350.

Subtract $11,400 of annual debt service and annual cash flow is $8,950, or $746 a month. Cash-on-cash return is 11.55%, comfortably inside the 8–12% band.

Two supporting numbers put that in context. Cap rate is 8.14% — the return the property would produce with no mortgage at all — so leverage is adding roughly three and a half points here, which is what borrowing at a rate below the property's unleveraged yield does. And DSCR is 1.79, well above the 1.20–1.25 floor most lenders require. The operating expense ratio comes out at 35.1% of effective gross income, at the optimistic end of the usual range and worth double-checking against real quotes.

A Second Example: A Healthy Cap Rate and a Losing Deal

Leverage cuts both ways, and cap rate will not warn you. Take a $420,000 property with 20% down ($84,000), $12,000 closing, no rehab, renting for $39,600 a year at 6% vacancy, with $17,000 of operating expenses and $25,800 of annual debt service.

Effective gross income = $37,224. Net operating income = $20,224. Cap rate = 20,224 ÷ 420,000 = 4.82% — unexciting, but not obviously a disaster.

Then debt service lands. Annual cash flow = 20,224 − 25,800 = −$5,576, a loss of $465 every month. Cash-on-cash return is −5.81% on $96,000 of invested capital, and DSCR is 0.78 — the property produces only 78 cents of operating income for every dollar of mortgage payment.

Nothing about this property is bad; the financing is. The same building bought with more cash down, or at a lower rate, or at a lower price, produces positive cash flow. That is precisely why cash-on-cash is the metric leveraged investors underwrite to and cap rate is not: a DSCR below 1.0 means the asset cannot cover its own debt, and most lenders will decline the loan before you get the chance to find out the hard way.

Cash-on-Cash, Cap Rate, and What Each One Misses

Cap rate measures the property; cash-on-cash measures your position in it. Cap rate divides NOI by price and ignores financing entirely, which makes it the right tool for comparing two buildings against each other. Cash-on-cash divides cash flow by cash invested and is dominated by the mortgage, which makes it the right tool for comparing this deal against putting the same money somewhere else. Neither is more correct; they answer different questions, and quoting one when you mean the other is how deals get mis-sold.

DSCR is the lender's version of the same question. At 1.25 a property generates 25% more operating income than its debt payment, which is the usual commercial floor; below 1.0 it cannot cover the mortgage from operations at all. If your cash-on-cash is negative, DSCR will already have told you why.

What cash-on-cash misses is most of the return. It counts only pre-tax cash in a single year, so it excludes appreciation, the principal you pay down each month (which is your money moving from income into equity, not a loss), depreciation and the tax shelter it creates, and any rent growth after year one. A property at 4% cash-on-cash with strong appreciation and heavy amortisation can outperform one at 10% with neither — the rental property ROI calculator adds those components for a total-return view.

The other honest caveat is that this metric is only as good as the expense line. Underwriting that omits capital reserves, management fees you will eventually pay someone, or a realistic maintenance allowance will produce a flattering number that the property never delivers. Build the expense figure properly with the net operating income calculator, compare against the simpler rental yield calculator, and for short-term rentals — where the expense structure is entirely different — the Airbnb ROI calculator and the Airbnb ROI guide cover cash-on-cash in that context.

Limitations

This calculator performs exact arithmetic on the figures you enter, and a rental analysis is only as good as its expense assumptions. The most common failure is not arithmetic but optimism: omitting capital expenditure reserves for the roof and mechanicals, assuming self-management costs nothing, using a vacancy rate below what the local market actually experiences, or underestimating turnover costs between tenants. If your operating expense ratio comes out well under about 35% of effective gross income, something has probably been left out.

It is a single-year, pre-tax snapshot. It does not model appreciation, the equity built by principal repayment, depreciation and the tax shelter it provides, rent growth, expense inflation, or the eventual sale — all of which can dominate total return over a realistic holding period. It also assumes stabilised operations: a property bought vacant, or one being repositioned, will produce a much lower first-year figure than its stabilised one.

Finally, it says nothing about risk, and returns are not comparable across risk levels. A 12% cash-on-cash return on a high-leverage purchase in a soft market is not the same asset as 8% on a low-leverage purchase in a stable one, and the higher number is not automatically the better investment. This is a general educational tool, not investment or tax advice — model your own numbers, verify expense assumptions against real quotes, and consult a qualified professional before committing capital.

Related Calculators

Build the inputs before trusting the output: the Net Operating Income Calculator works through the expense side line by line, and the Rental Yield Calculator gives the simpler gross and net yield view for comparison. For total return including appreciation, amortisation, and tax effects, the Rental Property ROI Calculator goes considerably further than a single-year cash figure. For short-term rentals, where occupancy, cleaning, and platform fees change the expense structure entirely, use the Airbnb ROI Calculator alongside the Airbnb ROI Guide.

Related concepts

Total Cash Invested

Every dollar out of pocket before the property produces income — down payment, closing costs, and rehab. The denominator that decides whether the return is honest.

Net Operating Income

Effective gross income less operating expenses, with the mortgage deliberately excluded. The figure both cap rate and DSCR are built from.

Debt Service Coverage Ratio

Net operating income divided by annual debt service. Lenders typically want 1.20–1.25 or better; below 1.0 the property cannot cover its own mortgage from operations.

Frequently Asked Questions

How do you calculate cash-on-cash return?+

Divide annual pre-tax cash flow by total cash invested and multiply by 100. Cash flow is net operating income minus annual debt service; cash invested is down payment plus closing costs plus rehab. A $8,950 cash flow on $77,500 invested is an 11.55% cash-on-cash return.

What is a good cash-on-cash return?+

8–12% is a commonly cited target range for residential rentals, though it varies enormously by market and by how much leverage is used. Treat it as a screening threshold rather than a rule: a lower figure with strong appreciation can beat a higher one without it, and a very high figure usually means either high leverage or an expense line that is missing something.

What is the difference between cash-on-cash return and cap rate?+

Cap rate divides net operating income by purchase price and ignores financing, which makes it a measure of the property. Cash-on-cash divides cash flow by cash invested and is dominated by the mortgage, which makes it a measure of your position. In the example here, cap rate is 8.14% and cash-on-cash is 11.55% — the gap is what leverage is doing.

Should rehab costs count as cash invested?+

Yes. Any money spent before the property produces income is invested capital, not an operating expense. Leaving rehab out of the denominator is the most common way this metric gets inflated — $8,000 of make-ready work omitted from a $77,500 basis overstates the return by more than a percentage point.

Do I include the mortgage in operating expenses?+

No, and this is the most frequent error in rental analysis. Operating expenses are taxes, insurance, management, maintenance, reserves, and utilities you pay. The mortgage is debt service, subtracted after net operating income, and mixing the two makes both cap rate and NOI meaningless.

What is DSCR and why does it matter here?+

Debt service coverage ratio is net operating income divided by annual debt service — how many times over the property covers its own mortgage. Most lenders want 1.20–1.25 or better. Below 1.0 the property cannot cover the loan from operations, which is the same condition that produces a negative cash-on-cash return.

Can cap rate look fine while cash-on-cash return is negative?+

Yes, and it happens often. A property with a 4.82% cap rate and $25,800 of annual debt service against $20,224 of NOI produces −$5,576 of cash flow and a −5.81% cash-on-cash return. The property is not the problem; the financing is. DSCR of 0.78 flags it immediately.

What does cash-on-cash return leave out?+

Most of the total return. It is a single-year pre-tax cash figure, so it excludes appreciation, the equity built by principal repayment, depreciation and its tax shelter, rent growth, and the eventual sale. Read it alongside a full ROI calculation rather than as the whole picture.

Formula

Cash-on-cash return formula

Total Cash Invested = Down Payment + Closing Costs + Rehab Costs
Effective Gross Income = Gross Rent − Vacancy Loss + Other Income
Net Operating Income = Effective Gross Income − Operating Expenses
Annual Cash Flow = Net Operating Income − Annual Debt Service
Cash-on-Cash Return = Annual Cash Flow ÷ Total Cash Invested × 100

Cap Rate = Net Operating Income ÷ Purchase Price × 100
DSCR = Net Operating Income ÷ Annual Debt Service

Step by step

How the calculation works

1Total cash invested is the whole amount out of your pocket to get the property producing — down payment, closing costs, and any rehab or make-ready work. Leaving rehab out is the most common way this metric gets inflated: money spent before the first tenant moves in is invested capital, not an expense.
2Enter gross annual rent and a realistic vacancy rate. Five percent is a common planning figure in a stable market, but check local data rather than assuming — vacancy is where optimistic underwriting usually starts.
3Operating expenses cover property taxes, insurance, management, maintenance, repairs, HOA dues, and any utilities you pay. They do not include the mortgage: that is debt service, entered separately, and mixing the two is the single most frequent error in rental analysis. A useful sanity check is the operating expense ratio this calculator reports — for a typical single-family rental it commonly lands somewhere around 35–50% of effective gross income, and a figure far below that usually means something has been left out.
4Annual debt service is twelve months of principal and interest. Because it includes principal, part of your "cost" is actually equity accumulating — which is why cash-on-cash understates total return, and why it should be read alongside the appreciation and amortisation this calculator does not model.
5For context on what the numbers mean, 8–12% is a commonly cited target range for cash-on-cash on a residential rental, though what is achievable varies enormously by market and by how much leverage you use. To build the operating-expense figure properly, the [net operating income calculator](/calculators/net-operating-income-calculator) works through it line by line; for the whole-deal picture including appreciation, the [rental property ROI calculator](/calculators/rental-property-roi-calculator) goes further.

Related guides

Learn more about this calculation

Guide