What is a good cash-on-cash return for rental property?

A good cash-on-cash return depends on your market, risk tolerance, and alternative investment options. As a rule of thumb: 6–8% is solid in most markets, 8–12% is strong, and above 12% is exceptional (often found in higher-risk or higher-vacancy markets). In expensive primary markets like New York or San Francisco, a 3–5% CoC return may still be acceptable if you are banking on appreciation. Always compare CoC return to risk-free alternatives like Treasury yields.

How is cash-on-cash return different from cap rate?

Cap rate is a pre-financing metric — it ignores your mortgage entirely and measures the property's income relative to its value. Cash-on-cash return is a post-financing metric — it measures your actual cash flow (after mortgage payments) relative to the cash you personally invested. The same property can have a 7% cap rate but only a 4% CoC return if the debt service is high, or a 10% CoC return if you got favorable financing. Use cap rate to compare properties; use CoC return to evaluate your actual investment performance.

What costs should I include in total cash invested?

Total cash invested includes your down payment, all closing costs paid out of pocket (lender fees, title insurance, attorney fees, prepaid taxes and insurance), any inspection fees, and all rehabilitation or renovation costs needed to make the property rent-ready. If you also funded reserves (emergency fund) at closing, those can be included. Do not include costs financed through your mortgage or seller-paid concessions.

Does cash-on-cash return include appreciation?

No — cash-on-cash return is a pure income metric that measures only the cash flow you receive relative to your invested capital. It does not account for property appreciation, mortgage principal paydown, depreciation tax benefits, or equity built over time. For a comprehensive return picture, you need to calculate the total return (IRR) which includes appreciation and equity buildup. CoC return is best used as a quick screening tool for income-producing properties.

What is a typical cash-on-cash return in today's market?

In 2024–2026, rising purchase prices and higher mortgage rates have compressed CoC returns in many markets. Cash-on-cash returns of 4–6% have become common in competitive residential markets, down from the 8–12% many investors achieved pre-2020. Investors targeting higher returns are increasingly looking at multifamily value-add deals, short-term rentals, or secondary/tertiary markets where cap rates remain elevated.

How can I improve cash-on-cash return?

You can improve CoC return by: (1) increasing rent — even a modest rent increase significantly impacts cash flow, (2) reducing operating expenses through self-managing the property, (3) refinancing to a lower rate when possible, (4) finding properties with seller financing or creative financing structures, (5) buying below market value and forcing appreciation through renovation, and (6) adding income streams such as laundry, parking, or storage.

Should I include vacancy in my cash-on-cash calculation?

Yes — always account for vacancy. Most investors include a vacancy reserve of 5–10% of gross rents in their annual operating expenses, which reduces the effective income. Alternatively, you can reduce your gross rent figure by the expected vacancy rate before entering it. Ignoring vacancy leads to overly optimistic projections, especially for single-family rentals where any vacancy means zero income.

Cash on Cash Return Calculator

The Cash on Cash Return Calculator measures the annual pre-tax cash return on your actual cash invested in a rental property. Unlike cap rate, CoC return accounts for financing — making it the most practical metric for leveraged real estate investors. A strong CoC return means your cash is working hard relative to what you put in. Enter your purchase details, operating income, and debt service below to see your projected return.

Down Payment

Out-of-pocket cash at purchase

Closing Costs

Lender fees, title, prepaid expenses

Rehab / Renovation Costs

Upfront costs to make property rent-ready

Annual Gross Rent

Total annual rental income at full occupancy

Annual Operating Expenses

Taxes, insurance, management, maintenance — not mortgage

Annual Mortgage Payments

Annual P+I payments (monthly payment × 12). Enter 0 if paying cash.

Cash-on-Cash Return

4.83%

Annual Cash Flow

$4,900.00

Total Cash Invested

$101,400.00

Annual NOI

$19,300.00

How to use this calculator

1
Enter purchase price and down payment
Input the total purchase price and the dollar amount of your down payment. The down payment is the largest component of your total cash invested.
2
Add closing costs and rehab costs
Include all out-of-pocket closing costs (typically 1–3% of purchase price for buyers) and any upfront rehabilitation or renovation costs before the property is rent-ready.
3
Enter annual gross rent
Input the expected annual rental income at full occupancy. For multi-unit properties, sum all unit rents. Optionally reduce for vacancy before entering — or enter gross rent and let operating expenses cover a vacancy reserve.
4
Enter annual operating expenses
Include property taxes, insurance, property management (typically 8–12% of gross rents), maintenance, and a vacancy reserve. Do not include mortgage payments — those are entered separately.
5
Enter annual mortgage payments
Enter the total principal + interest payments for the year (monthly payment × 12). This is your debt service. If paying cash, leave this at zero.
6
Read your cash-on-cash return
The calculator shows your CoC return percentage, annual cash flow, total cash invested, and NOI. A CoC return of 8–12% is generally considered good for a leveraged rental property in most markets.

Formula

Total Cash Invested = Down Payment + Closing Costs + Rehab Costs

Annual NOI = Annual Gross Rent − Annual Operating Expenses

Annual Cash Flow = Annual NOI − Annual Mortgage Payments

Cash-on-Cash Return = (Annual Cash Flow ÷ Total Cash Invested) × 100

Cash-on-cash return compares the annual pre-tax cash flow you receive to the total out-of-pocket cash you put into the deal. It is a return-on-equity metric — unlike cap rate, it reflects the impact of your financing. Example: you invest $80,000 total (down payment + closing + rehab), your property generates $12,000 NOI, and your mortgage costs $8,400/year, leaving $3,600 annual cash flow. CoC return = $3,600 / $80,000 × 100 = 4.5%. Source: CCIM Institute cash-on-cash definition.

Worked Example

Purchase Price: $320,000 Down Payment (25%): $80,000 Closing Costs: $6,400 Rehab Costs: $15,000 Total Cash Invested: $101,400 Annual Gross Rent: $28,800 Annual Operating Expenses: $9,500 Annual NOI: $19,300 Annual Mortgage Payments: $14,400 ($1,200/mo) Annual Cash Flow: $4,900 Cash-on-Cash Return = $4,900 ÷ $101,400 × 100 = 4.83% A 4.83% CoC return means every dollar of cash invested earns roughly $0.048 per year in pre-tax cash flow. Investors typically target 6–12% depending on market and risk.

Frequently Asked Questions

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