# Cash-on-Cash Return Calculator Annual pre-tax cash flow over cash invested, shown next to cap rate and debt service coverage ratio. --- - **Canonical URL:** https://dothecalculation.com/calculators/cash-on-cash-return-calculator - **Category:** Real Estate & Property - **Publisher:** Do The Calculation (https://dothecalculation.com) - **Cost:** Free, no account or sign-up required - **Privacy:** Runs entirely in the browser; inputs are never sent to a server - **Methodology:** https://dothecalculation.com/methodology --- ## Cash-on-Cash Return on a Rental Property Divide annual pre-tax cash flow by the cash you actually put in — and see it next to cap rate and DSCR, so the effect of the financing is visible rather than hidden. - Counts down payment, closing costs, and rehab as invested capital - Shows cap rate alongside, so leverage effects are explicit - Reports DSCR, the figure a lender will actually underwrite to ## 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: \(\text{CoC} = \frac{\text{Annual Pre-Tax Cash Flow}}{\text{Total Cash Invested}} \times 100\). 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](/calculators/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](/calculators/net-operating-income-calculator), compare against the simpler [rental yield calculator](/calculators/rental-yield-calculator), and for short-term rentals — where the expense structure is entirely different — the [Airbnb ROI calculator](/calculators/airbnb-roi-calculator) and the [Airbnb ROI guide](/blog/property/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](/calculators/net-operating-income-calculator) works through the expense side line by line, and the [Rental Yield Calculator](/calculators/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](/calculators/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](/calculators/airbnb-roi-calculator) alongside the [Airbnb ROI Guide](/blog/property/airbnb-roi-guide). ## 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. ## 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. ## Related guides - [Airbnb ROI Guide: How to Calculate Cap Rate, Cash Flow, and Cash-on-Cash Return](https://dothecalculation.com/blog/property/airbnb-roi-guide) — Underwrite short-term rentals like a professional. Learn how to calculate cap rate, monthly net cash flow, and occupancy-driven returns using actual vacation rental math. - [How to Use Do The Calculation Calculators: A Practical Step-by-Step Guide](https://dothecalculation.com/blog/site-guides/how-to-use-calculators) — Learn the fastest reliable workflow for using Do The Calculation calculators, reading results, checking formulas, and using save, print, share, and export actions correctly. ## Related calculators - [Airbnb ROI Calculator](https://dothecalculation.com/calculators/airbnb-roi-calculator) — Calculate Airbnb rental ROI, including projected monthly cash flow, cap rate, and cash-on-cash return, to evaluate short-term rental profitability. - [Rental Property ROI Calculator](https://dothecalculation.com/calculators/rental-property-roi-calculator) — Calculate rental property ROI with projected monthly cash flow, cap rate, cash-on-cash return, and net operating income for investment properties. - [Debt Service Coverage Ratio (DSCR) Calculator](https://dothecalculation.com/calculators/dscr-calculator) — Calculate Debt Service Coverage Ratio and surplus cash flow to analyze your ability to repay loans and qualify for new financing. - [Commercial Debt Yield & DSCR Calculator](https://dothecalculation.com/calculators/debt-yield-commercial-calculator) — Calculate commercial mortgage debt yield, debt service coverage ratio, and maximum underwritten loan amount for commercial property financing. - [LBO Model & Debt Schedule Calculator](https://dothecalculation.com/calculators/lbo-model) — Evaluate leveraged buyout returns, debt payoff schedules, multiple of invested capital, and internal rate of return metrics. - [BRRRR ROI Calculator](https://dothecalculation.com/calculators/brrrr-calculator) — Evaluate Buy, Rehab, Rent, Refinance, Repeat investment deals by calculating cash left in the deal, equity created, and overall return on investment. --- _This calculator performs exact arithmetic on the figures you enter, and a rental analysis is only as good as its expense assumptions — omitted capital reserves, management fees, or an unrealistic vacancy rate will produce a flattering number the property never delivers. It is a single-year pre-tax snapshot that excludes appreciation, principal paydown, depreciation, rent growth, and the eventual sale. This is a general educational tool, not investment or tax advice; verify assumptions against real quotes and consult a qualified professional before committing capital._ --- _Source: [Do The Calculation](https://dothecalculation.com/calculators/cash-on-cash-return-calculator). Quote freely with attribution and a link to this page._