Cash-on-Cash Return Calculator

How it works

Annual cash flow = (rent × (1 − vacancy) − operating expenses − mortgage P&I) × 12 · Cash-on-cash = annual cash flow ÷ (down payment + closing) × 100

Cash-on-cash return answers the leveraged investor's real question: what does my actual out-of-pocket cash earn each year? Unlike cap rate, it subtracts the mortgage payment and divides by only the cash you invested — down payment plus closing and upfront costs — not the whole price. Because financing magnifies returns, a modest cap-rate property can post a strong cash-on-cash figure with the right loan, or a negative one if the payment swallows the rent. It captures year-one cash yield only, ignoring principal paydown, appreciation and taxes.

Worked example

Buy at $300,000 with 25% down ($75,000) plus $8,000 closing — $83,000 invested. The $225,000 loan at 7% over 30 years costs $1,497/month. Rent of $2,400 at 5% vacancy is $2,280; minus $750 expenses and the mortgage leaves about $33/month, or $396/year — a 0.5% cash-on-cash return, a signal to renegotiate price, rent or terms.

Frequently asked questions