Cash-on-Cash Return Calculator
Cash flow & cash in
Your result will appear here
Fill in the fields on the left and this updates as you type.
Know what this estimate is based on
- Jurisdiction
- United States — state and local practice
- Scope and limitations
- Educational estimate only. U.S. real estate costs are local: property tax rates, transfer and recording taxes, title practice, who customarily pays which closing cost, and landlord-tenant rules all change by state and often by county or city. Agent commission is negotiable and, since the 2024 NAR settlement, buyer-agent compensation is negotiated separately rather than assumed. Only a lender's Loan Estimate, a title company's fee sheet or a signed contract binds a number.
- Source links checked
- Jul 30, 2026
Built and regression-tested by Smart Tools Lab. It has not been individually reviewed by a licensed financial, tax, or legal professional.
How to use
- 01
Enter the rent you actually collect each month, your monthly operating costs, and the mortgage payment.
- 02
Enter the down payment — the largest part of the cash you put in.
- 03
Open Advanced options for closing costs, rehab and anything else paid up front. They do not change cash flow but they change the return.
- 04
Read the return, then the years to get your cash back.
- 05
Check the sensitivity table: the same cash outlay at other cash flows, so you can see how much a $100 swing matters.
Formula
Monthly cash flow is rent collected minus operating costs minus the mortgage payment, and it is derived rather than entered so it is free to go negative — no money field on this site carries a negative minimum, and a rental that loses money every month has to be expressible. Annual cash flow is twelve times that. Cash invested is the down payment plus closing costs plus rehab plus anything else paid up front. Cash-on-cash return is annual cash flow divided by cash invested. That division is guarded, and the guard is the point of the page: with no cash in the deal the return is undefined rather than infinite, and it renders as a dash with an explanation rather than a number. Payback is cash invested divided by annual cash flow, shown as "never at this cash flow" when the flow is zero or negative. The paydown variant adds year-one principal to the numerator.
Example
A rental collecting $2,400 a month, with $900 of operating costs and a $1,324 mortgage payment, bought with $66,000 down, $8,000 of closing costs, $12,000 of rehab and $2,000 of other up-front costs. Step 1 — Monthly cash flow: $2,400 − $900 − $1,324 = $176. Step 2 — Annual: $176 x 12 = $2,112. Step 3 — Cash invested: $66,000 + $8,000 + $12,000 + $2,000 = $88,000. Step 4 — Cash-on-cash: $2,112 / $88,000 = 2.4%. Step 5 — Payback: $88,000 / $2,112 = 41.7 years. That payback figure is the useful shock. At 2.4% the cash flow alone will not return your capital in any timeframe that matters, which means the deal is not a cash-flow deal — it is an appreciation and paydown deal, and it should be judged as one. Count the $3,200 of principal your tenant repays in year one and the return rises to 6.0%. That is real money and it is a fair way to look at the deal. It is also money you cannot touch until you sell or refinance, which is exactly why the two figures are reported separately rather than blended into one.
Definitions
- Cash-on-cash return
- Annual pre-tax cash flow divided by the cash invested. A year-one measure of what your own money earns.
- Cash invested
- Down payment plus closing costs plus rehab plus anything else paid up front.
- Cash flow
- Rent collected less operating costs less the mortgage payment. What actually reaches your account.
- Leverage
- Using borrowed money to buy. It amplifies returns when the cap rate exceeds the loan rate and suppresses them when it does not.
- Payback period
- Years of cash flow needed to recover the cash you invested.
- Principal paydown
- The loan balance reduced by your tenant's rent. Real return you cannot spend until you sell or refinance.
- Pre-tax return
- The convention for cash-on-cash, keeping it comparable between investors in different brackets.
- Negative cash flow
- A property costing money each month, held for appreciation or paydown instead.
- Cap rate
- NOI over price. The unlevered comparison, against which cash-on-cash shows the effect of the loan.
- Operating costs
- Tax, insurance, maintenance, management, reserves — everything except the mortgage.
- Undefined return
- What cash-on-cash is when no cash was invested. Not infinite; there is simply nothing to divide by.
- Total return
- Cash flow plus paydown plus appreciation plus tax benefits. The full picture cash-on-cash deliberately excludes.
Good to know
The only return that is actually cash
Cash-on-cash divides the annual pre-tax cash flow by the cash you actually put in — $2,112 against $88,000 here, a 2.4% return. It is the most honest of the rental metrics in one specific sense: everything in it is money that moved. Cap rate ignores your financing, total return includes appreciation you have not received and paydown you cannot spend, and IRR requires assumptions about a sale that has not happened. Cash-on-cash asks only what landed in your account this year against what left it at closing. That narrowness is also its limitation. At 2.4% this deal underperforms a savings account on the cash measure alone, and an investor who stopped there would reject a property that may well be a good one once paydown, depreciation and appreciation are counted.
Everything that goes into the denominator
Total cash invested is more than the down payment, and understating it is the most common way this metric gets inflated. Here it is $88,000: a $66,000 down payment, $8,000 of closing costs, $12,000 of rehab and $2,000 of other upfront costs. Loan origination fees, points, inspection, appraisal, title insurance, the initial escrow deposit, and any holding costs before the first tenant all belong in it. So does the cost of making the unit rentable — appliances, a make-ready clean, the locks. Leaving $22,000 of that out would report a 3.2% return instead of 2.4%, a third higher, on exactly the same property. When comparing your return against someone else's claimed figure, the denominator is the first thing to ask about, because it is the easiest place for an honest person to be optimistic.
Why the target matters more than the number
Investors commonly set 8% to 12% as a cash-on-cash target, and the range reflects what else the money could do rather than anything intrinsic to real estate. Against an 8% target this property is short by $411 a month — it would need $587 of monthly cash flow instead of $176. Stating the gap in monthly dollars is more actionable than stating it in percentage points, because $411 is something you can attack: a rent increase at renewal, a cheaper insurance policy, self-managing for a year, or simply a lower purchase price. It also prices the alternative honestly. Money left in Treasuries earns its yield with no tenant, no roof and no vacancy, so a rental returning 2.4% in cash is being bought for the other three returns, and that should be a conscious trade.
Adding principal paydown changes the picture
Counting the $3,200 of principal repaid in year one lifts the return from 2.4% to 6.0%. That is a legitimate return — it is equity you own, built by the tenant — but it is not cash, and the distinction matters in exactly the situation where it hurts. Principal paydown does not pay for a new furnace, cover a vacant month or fund the next down payment. It is realised only by selling or refinancing, and both cost money. So the two figures answer different questions: 6.0% is closer to the economic return and 2.4% is closer to the survivability. An investor with reserves can reasonably lean on the first. An investor whose reserves are the year's cash flow should be looking at the second, because that is the number that runs out.
Year one is not the pattern
Cash-on-cash is normally computed on the first full year, and the first year is the worst one by design. The denominator includes every upfront cost and never repeats. The numerator carries a make-ready period, possibly a lease-up vacancy, and rent set at whatever the market was when you bought. From year two the cash invested is fixed while rent grows, principal paydown accelerates, and the fixed-rate payment stays put — so the return climbs mechanically even with no appreciation at all. That is why a 2.4% first-year figure is not necessarily a verdict, and why comparing your year-one number against someone else's year-five number is meaningless. Compute it for year one to decide whether to buy, and recompute it annually against your actual results to decide whether to keep.
Frequently asked questions
What is cash-on-cash return?
Annual pre-tax cash flow divided by the cash you actually invested. It answers one question — what is the money that left my account earning? — and deliberately ignores appreciation, principal paydown and tax effects.
What is a good cash-on-cash return?
Investors commonly target 8% to 12%, though what is achievable varies enormously by market and by year. In a high-rate environment many otherwise sound properties land at 2% to 5%, which is not automatically a bad deal — it means the return is coming from somewhere other than cash flow.
How is this different from cap rate?
Cap rate divides NOI by the price and ignores the loan entirely. Cash-on-cash divides cash flow by the cash you put in, so it includes the effect of leverage. They agree only on an all-cash purchase with no closing costs; everywhere else the difference is the mortgage.
Why is my cash-on-cash lower than the cap rate?
Because the loan rate is above the cap rate. Borrowing at 7% to buy an asset yielding 6.3% means every borrowed dollar earns less than it costs — leverage working against you. When the cap rate exceeds the loan rate, the effect reverses and cash-on-cash rises above it.
What counts as cash invested?
Everything that left your account to acquire the property: down payment, closing costs, rehab, and any inspection or holding costs before the first tenant. Counting only the down payment overstates the return, often substantially.
What if I bought with no money down?
Then the return is undefined, not infinite — there is nothing to divide by. This page says so in words rather than printing a number, because an infinite return is a rounding error dressed as a result. The useful measures there are cash flow in dollars and DSCR.
Should this be before or after tax?
Before, by convention. It keeps the number comparable between investors in different brackets. If you want the after-tax view, subtract the tax on the rental income and add back the value of the depreciation deduction — which frequently turns a small positive into a larger one.
Why include principal paydown separately?
Because it is real money you are receiving, but you cannot spend it. Adding the year-one principal to the numerator shows a very different figure — 6.0% against 2.4% on these defaults — and both are true answers to different questions.
Does cash-on-cash change over time?
Yes. The denominator is fixed at what you put in, but the numerator grows as rent rises and, after the loan is repaid, jumps sharply. Cash-on-cash is a year-one metric, and a deal that starts at 3% can be at 8% in a decade.
How long should payback take?
There is no rule, but a payback longer than fifteen or twenty years is a signal that the cash flow is not the point of the deal. If the property only works through appreciation, say so explicitly rather than letting the cash-flow figure carry an argument it cannot support.
Is a negative return always a bad deal?
Not always, but it means you are paying every month to hold the property, betting that appreciation and paydown outweigh it. That is a real strategy in expensive markets and a dangerous one if the holding period turns out shorter than planned.
Should I use this or the full rental property calculator?
Use this when you already know your three monthly figures. Use the Rental Property Calculator when you need to build them from a price, a rent and a set of allowances — it will also tell you whether the operating costs you entered here are realistic.