How to use this calculator
Start with the purchase details: property price, down payment percentage, closing costs, and any renovation expenses. These determine your total cash invested, which is the denominator in the cash-on-cash calculation.
Enter your monthly rental income and any additional income from laundry, parking, storage, or other sources. Then fill in all monthly expenses including mortgage payment, taxes, insurance, maintenance, management, and vacancy allowance.
The calculator shows your monthly and annual cash flow, cash-on-cash return percentage, payback period (how many years to recoup your initial investment), and a complete monthly income and expense breakdown.
Understanding cash-on-cash return
Cash-on-cash return answers the most practical question in rental investing: what percentage return does your actual out-of-pocket money earn each year? Unlike cap rate, which assumes an all-cash purchase, cash-on-cash accounts for mortgage leverage.
Because you use leverage (a mortgage) to control a larger asset with less money, your cash-on-cash return can be significantly higher than the cap rate on the same property. This is the power of leverage in real estate investing.
However, cash-on-cash only measures cash flow. It does not capture property appreciation, mortgage principal paydown, or tax benefits from depreciation. The total return on a rental property is typically higher than the cash-on-cash figure alone.
Frequently asked questions
What is cash-on-cash return?
It is the annual pre-tax cash flow divided by total cash invested. If you invest $60,000 and earn $6,000 per year in cash flow, your cash-on-cash return is 10%.
What is a good cash-on-cash return?
Below 4% is poor, 4% to 8% is acceptable, 8% to 12% is good, and above 12% is excellent. These vary by market and risk tolerance. Compare against alternative investment options.
How is this different from cap rate?
Cap rate ignores financing (all-cash basis). Cash-on-cash measures your return after mortgage payments, based only on the cash you actually invested. Leverage typically makes cash-on-cash higher than cap rate.
What counts as total cash invested?
Down payment plus closing costs plus any renovation or repair costs needed to make the property rent-ready. Every dollar you spend out of pocket before generating income.
Does this include property appreciation?
No. Cash-on-cash only measures annual cash flow return. It does not include appreciation, principal paydown, or tax benefits from depreciation. Total investment return is typically higher.