The real return on the cash you put in.
Cap rate ignores your loan. Cash-on-cash does not. Enter the deal and see what your actual out-of-pocket cash earns each year, once the mortgage and every expense are paid.
The deal
Is this return any good?
From gross rent to your cash flow
Annual cash-flow waterfall
How leverage moves the return
Return scorecard
Cash-on-cash at different down payments
More borrowed money means less cash invested and a bigger mortgage. Watch how the return, and the monthly cash flow, shift as you change how much you put down.
| Down | Cash invested | Loan | Debt service /yr | Cash flow /yr | Cash-on-cash |
|---|
Cash-on-cash return, explained
Cash-on-Cash vs Cap Rate
Cap rate is unleveraged (assumes all cash purchase). Cash-on-cash includes leverage, it's the return on the cash you actually put in. Cash-on-cash is usually higher because mortgage amplifies returns.
What to Include in Cash Invested
Down payment + closing costs + initial repairs + rehab costs. Sometimes called 'all-in' cost. Excludes ongoing mortgage payments (those affect cash flow, not cash invested).
Target Returns
5-8% is acceptable for stabilized rentals. 8-12% is strong. 12%+ usually requires value-add (BRRRR strategy, rehab, repositioning). Negative returns happen, analyze before buying.
CoC Limitations
Doesn't include appreciation, principal paydown, or tax benefits. For full return analysis, use IRR which captures all components over the holding period.
Common questions
What's a good cash-on-cash return?
5-8% acceptable, 8-12% strong, 12%+ excellent. Below 5% questionable unless other factors (appreciation, tax benefits) compensate.
Does CoC include principal paydown?
No, only cash in your pocket. Principal paydown builds equity but doesn't appear in cash flow.
Why is CoC higher than cap rate?
Leverage. Borrowing money to buy multiplies the return on your cash portion. The flip side: more risk if property values drop.
How does CoC change over time?
Usually increases as rent grows (cash flow up) while cash invested stays flat. Refinancing can also reset CoC by extracting equity.
CoC vs IRR?
CoC is annual snapshot. IRR is multi-year return including sale proceeds, appreciation, and principal paydown. IRR is more complete; CoC is simpler.
Estimates for planning only. Cash-on-cash return measures pre-tax cash flow against the cash you invest; it ignores appreciation, principal paydown and tax benefits. Verify rent, expenses and financing terms before you buy.