It measures this year's cash only
It leaves out loan paydown, appreciation, tax effects and the sale. A low cash return can still be part of a good long-term investment, and a high one can hide a property that is losing value.
Cash-on-cash return calculator
See what a rental pays you each year on the cash you actually put in: down payment, closing costs and repairs.
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Cash-on-cash return calculator
Enter the yearly cash flow after the mortgage and all operating costs, and every dollar you paid to buy and prepare the property. The starting figures are hypothetical.
- Cash-on-cash return
- 6%
- Annual cash flow ÷ cash invested
- Total cash invested
- $75,000
- Monthly cash flow
- $375
- Years to recover cash
- 16.7
- At this cash flow, before any sale
Formula: Cash-on-cash return = annual pre-tax cash flow ÷ total cash invested.
Starting figures are hypothetical examples, except where a section names its source. Results are screening estimates, not appraisals, loan approvals or investment advice.
How to calculate cash-on-cash return
The National Apartment Association defines it as cash flow divided by the down payment or initial equity. Cash flow is what is left after operating expenses, debt service and capital spending.
Add up the cash you put in
A $60,000 down payment, $9,000 of closing costs and $6,000 of repairs come to $75,000.
Find annual cash flow
Start with net operating income, then subtract a year of mortgage payments and any capital spending or reserves. Here that leaves $4,500, or $375 a month.
Divide
$4,500 ÷ $75,000 = 0.06, a cash-on-cash return of 6%.
If you are still building the cash flow figure, the rental property calculator works it out from price, loan terms, rent and expenses.
How to read cash-on-cash return
Leverage changes it
Borrowing more lowers the cash you invest but raises the loan payment. Depending on the rate, that can push the return up or down. Compare it with the cap rate to see whether debt is helping.
Compare like with like
Count the same costs in every deal: closing costs, repairs and reserves. Leaving repairs out makes the return look higher than it is.
Negative is possible
If the mortgage and expenses exceed the rent, cash flow and the return are negative, and you fund the shortfall each month.
Frequently asked questions
QUICK ANSWERS
There is no standard figure. Investors compare it with what the same cash would earn elsewhere and with the risk of the property and market.
No. ROI usually counts total gain, including appreciation and loan paydown. Cash-on-cash return counts only the cash the property pays you in a year.
Cap rate divides NOI by the full price and ignores financing. Cash-on-cash divides cash flow after the mortgage by the cash you invested, so it reflects your loan.
Yes. Include every dollar you paid to acquire and prepare the property, or the return will be overstated.
How we reviewed this
Sources reviewed October 16, 2026. All example figures are hypothetical.