Cash-on-cash return measures annual pre-tax cash flow against the cash you put into the deal — down payment, closing costs and rehab. It answers a simple question: for every dollar I invest, how many dollars come back each year?
Unlike cap rate, cash-on-cash return includes the effect of leverage, so it reflects your actual equity position.
Formula
Cash-on-cash return = Annual pre-tax cash flow ÷ Total cash invested
Total cash invested includes the down payment, closing costs, and any upfront renovation. Annual pre-tax cash flow is NOI minus debt service.
How to calculate it
- Add up all cash you bring to closing.
- Compute annual cash flow after the mortgage.
- Divide annual cash flow by total cash invested.
Worked example
Assume a $320,000 property renting for $2,600/month with typical expenses and a 6.50% loan. Running those numbers through the RentScope engine gives:
Open the free calculator with your own numbers →
FAQ
What is a good cash-on-cash return?
Many investors target 8% or higher, but leveraged deals in high-appreciation markets often accept less in exchange for equity growth.
Is cash-on-cash the same as ROI?
No. Cash-on-cash looks only at annual cash flow. ROI or IRR also account for appreciation and loan paydown over the holding period.
Does cash-on-cash include taxes?
Cash-on-cash is typically pre-tax. RentScope Pro adds after-tax cash-on-cash using depreciation and your marginal tax rate.
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