Cash On Cash Return Calculator
Measure annual pre-tax cash flow against the cash you actually invested, and see whether your leverage is working for you or against you.
Cash On Cash Return Calculator
Results recalculate instantly on every keystroke. Nothing you type is transmitted.
What this result does not account for
- One year only, and pre-tax. It ignores appreciation, principal repayment and the time value of money.
- Assumes the cash flow entered is representative; a year with a major turnover will understate the steady state.
- Not comparable across investors unless the denominator is defined the same way.
In short: Cash-on-cash return is annual before-tax cash flow divided by total cash invested — deposit, closing costs and any refurbishment. Unlike the cap rate it is a levered measure, so it changes with the loan even when the property does not.
Formula
CoC = annual before-tax cash flow ÷ total cash invested
positive leverage when loan rate < cap rate
[('before-tax cash flow', 'NOI less annual debt service'), ('cash invested', 'deposit plus closing costs plus refurbishment'), ('positive leverage', 'borrowing lifts equity return above the unlevered yield')]
Worked Example
- Take annual before-tax cash flow — NOI less debt service.
- Add up every dollar of cash that left your account: deposit, closing costs, refurbishment.
- Divide the first by the second.
- Compare the loan rate against the cap rate to see whether leverage is helping.
- Sense-check against alternatives at similar risk rather than against a rule of thumb.
24,509.57 of annual cash flow on 294,000 of invested cash — 262,500 deposit plus 31,500 of closing costs — is a cash-on-cash return of 8.3366%. Because the loan costs 6.5% while the asset yields 8.02% unlevered, leverage is positive and the equity return sits above the cap rate. Adding the 8,802.09 of principal that tenants repaid lifts total first-year return to 11.3305%, which is the figure cash-on-cash alone never shows.
Strengths & Limits Of This Model
Where this engine is strong
- Includes closing costs and refurbishment by default
- States plainly whether leverage is positive or negative
- Shows the payback period on invested cash
Where it stops
- Blind to appreciation and amortisation
- Single year, pre-tax
Practical Use Cases
Comparing two deals
Placing two purchases side by side on the cash each actually requires.
Testing leverage
Confirming the loan rate sits below the cap rate before borrowing more.
Judging a refinance
Seeing what pulling cash out does to the return on the equity left in.
Setting an offer price
Working back from a target return to what you can afford to pay.
Reporting to a partner
Stating the current yield on contributed capital in a single figure.
Methodology & Editorial Standards
Cash-on-cash divides annual before-tax cash flow by the sum of deposit, closing costs and refurbishment. Closing costs and refurbishment are included by default rather than offered as optional extras, because excluding them is the most common way the measure is inflated. The leverage verdict compares the loan rate directly against the cap rate, which is the exact condition under which borrowing lifts or lowers the return on equity.
Computation runs in IEEE-754 double precision at full internal precision; rounding to two decimal places occurs strictly at the display layer, so no cumulative drift enters the result. All monetary outputs use accounting presentation — grouped thousands, two decimals, negatives in parentheses — so figures can be transcribed directly into a model or working paper. Division-by-zero and out-of-domain inputs return an em-dash rather than a misleading number.
This engine was reconciled against an independent reference implementation and hand-verified for the worked example above before release. Our full five-stage review process is published on the About Us page.
Disclaimer. This calculator is provided for informational and modelling purposes only and does not constitute financial, tax, legal, medical, or engineering advice. Verify all figures with a qualified professional before acting on them.
Cash On Cash Return Calculator — 10 Expert FAQs
10 analyst-written answers to the questions practitioners actually ask — optimised for voice and answer-engine retrieval.
What is a good cash-on-cash return?
It depends entirely on the market, the leverage and the risk. Eight to twelve per cent is a common expectation for stabilised residential rentals in ordinary markets, but a lower figure on a prime asset with strong appreciation prospects can be the better investment. Compare it against alternatives at similar risk, not against a number from a book.
How is cash-on-cash different from the cap rate?
The cap rate is unlevered — it measures the property. Cash-on-cash is levered — it measures your equity in the property. Buy the same building with a different loan and the cap rate is unchanged while the cash-on-cash moves sharply. Neither is better; they answer different questions.
What is positive leverage?
Borrowing at a rate below the property's cap rate, so each borrowed dollar earns more than it costs and equity return rises above the unlevered yield. When the loan rate exceeds the cap rate the effect reverses and leverage drags the return down — which is why rising rates hurt investors twice, through both financing cost and cap rate expansion.
Should closing costs be in the denominator?
Yes. They are cash you spent and will not recover. Quoting a return on the deposit alone inflates it, which is why brokers' figures often look better than an investor's own. Refurbishment at purchase belongs there too.
Does cash-on-cash include appreciation?
No, and that is its biggest blind spot. In most long holds appreciation and amortisation together dominate total return, yet neither appears here. Cash-on-cash answers only what the investment pays you in cash this year.
Should I use before-tax or after-tax cash flow?
Before-tax, by convention, so that returns are comparable between investors with different tax positions. After-tax cash-on-cash is a legitimate personal measure, but it cannot be compared with anyone else's figure and should be labelled clearly when quoted.
Why is my cash-on-cash falling as I borrow more?
Because your leverage has turned negative: the marginal loan costs more than the property yields. More debt only raises equity returns while the rate stays below the cap rate. Past that point additional borrowing lowers the return and raises the risk at the same time.
Can cash-on-cash be negative?
Yes, whenever cash flow is negative, which is common in high-priced markets and in the early years of a repositioning. It is not automatically a bad deal, but it does mean the investment is consuming cash and relies entirely on appreciation or improvement to produce a return.
How does it relate to the internal rate of return?
Cash-on-cash is a single-year snapshot; IRR is the annualised return over the whole hold including the sale. They frequently disagree — a deal with weak early cash flow can still produce a strong IRR through appreciation. Use cash-on-cash to compare years and IRR to judge the investment.
Does the deposit size change the return?
Yes, in both directions. A larger deposit means less debt, so more cash flow but more cash invested; a smaller deposit concentrates the return on less equity but raises the risk and lowers coverage. Which direction improves the return depends entirely on whether the leverage is positive.