Cash-on-Cash Return Calculator
Calculate cash-on-cash return: annual pre-tax cash flow divided by total cash invested in a rental property.
How to use this tool
- Enter annual pre-tax cash flow and total cash invested in the fields above.
- Results update instantly as you type — or click Calculate.
- Read your cash-on-cash return and the full breakdown beneath it.
Cash-on-cash return measures the actual cash yield on the dollars you personally put in. It's the most relevant return metric for leveraged real estate investments.
Formula
Cash-on-Cash Return (%) = Annual Pre-tax Cash Flow ÷ Total Cash Invested × 100
How it works
Cash-on-cash return measures the actual cash income received in a year relative to the total cash the investor put into the deal (down payment, closing costs, initial repairs), making it one of the most practical metrics for leveraged property investment because it accounts for financing costs.
The result is pre-tax and does not include equity build-up from mortgage amortisation or property appreciation; it reflects only the cash flowing back to the investor in the current year. A higher figure indicates a more cash-efficient deployment of capital.
Worked example
Worked example
- Annual pre-tax cash flow: $4,800; total cash invested: $60,000.
- Cash-on-Cash Return = 4,800 ÷ 60,000 × 100 = 8%.
Cash-on-Cash Return = 8%
Key terms
- Cash-on-cash return
- The ratio of annual pre-tax cash flow to the total equity capital deployed, expressed as a percentage; measures the immediate cash yield on invested funds.
- Annual pre-tax cash flow
- Rent collected minus all outgoings including mortgage payments, operating expenses, and vacancy losses — but before income tax is deducted.
- Total cash invested
- The sum of all out-of-pocket costs to acquire and prepare a property: down payment, stamp duty or transfer tax, legal fees, and any upfront renovation costs.
- Leverage
- Using borrowed money (a mortgage) to purchase a property; leverage amplifies both potential returns and potential losses compared with an all-cash purchase.
- Equity build-up
- The gradual increase in ownership share as mortgage principal is repaid; not captured by cash-on-cash return but contributes to total return.
Frequently asked questions
- What is a good cash-on-cash return?
- Most investors target 8–12% cash-on-cash return as a minimum threshold. Below 6% may be acceptable in appreciating markets; above 12% often indicates higher risk or a value-add opportunity.
- How is cash-on-cash different from ROI?
- Cash-on-cash uses only pre-tax cash flow (after mortgage) divided by cash invested. ROI is broader and may include equity buildup and appreciation. Cash-on-cash is more conservative and practical.