Cash-on-Cash Return CalculatorThe real return on the cash you put into a rental property
Enter the price, financing, rent and expenses to get your cash-on-cash return, payback period and year-one total return — then see whether your mortgage is helping or hurting, and the highest price that still hits your target return.
By Manzoor Ahmad · 13+ years of web development & SEO experienceLast updated: October 19, 2026
Cash-on-cash return
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Is your loan helping or hurting?
Leverage boosts returns only when the property earns more than the loan costs each year.
what the property earns
what the loan costs
Your cash invested
Year-one total return
Cash-on-cash counts only cash flow. Your full first-year return also includes loan paydown and appreciation.
How your down payment changes the return
Stress test: rent × interest rate
Cash-on-cash return if rent or your rate land differently. Your scenario is outlined.
What is cash-on-cash return? Cash-on-cash return is a rental property’s annual pre-tax cash flow divided by the total cash you invested, shown as a percentage. Cash flow is rent minus vacancy, operating expenses and mortgage payments; cash invested is your down payment, closing costs and upfront repairs. Investing $77,800 to earn $2,241 a year gives a cash-on-cash return of 2.88%.
How to Use the Cash-on-Cash Return Calculator
- Enter the price and cash inPurchase price, down payment, closing costs and any repairs you’ll pay before the first tenant moves in.
- Add your loan termsUse the rate you’ve actually been quoted for an investment property — it’s usually higher than the headline owner-occupied average.
- Enter rent and every expenseInclude vacancy, management, maintenance and CapEx reserves. Leaving them out is the fastest way to overstate cash-on-cash return.
- Read the leverage check and stress testSee whether the loan is lifting or dragging your return, the highest price that hits your target, and how sensitive the deal is to rent and rate changes.
Cash-on-Cash Return Formula
Cash-on-cash return: Annual pre-tax cash flow ÷ total cash invested × 100
Annual cash flow: Rent − vacancy − operating expenses − mortgage payments
Total cash invested: Down payment + closing costs + upfront repairs + loan fees
Worked example: a $260,000 rental
- Rent $2,600 × 12 = $31,200, less 5% vacancy = $29,640
- Operating expenses: tax $3,200, insurance $1,500, management, maintenance and reserves (18% = $5,335), other $600 = $10,635
- NOI: $29,640 − $10,635 = $19,005
- Loan $195,000 at 7.75% for 30 years = $1,397 a month, $16,764 a year
- Cash flow: $19,005 − $16,764 = $2,241
- Cash invested: $65,000 down + $7,800 closing + $5,000 repairs = $77,800
- Cash-on-cash return: $2,241 ÷ $77,800 = 2.88%
What the example reveals
This property’s cap rate is 7.31% — it earns 7.31% on its price. But a 30-year loan at 7.75% costs 8.60% of the balance each year in payments. Because the loan costs more than the property earns, borrowing lowers the return: the same house bought for cash would return about 6.97%, more than double the financed 2.88%.
That doesn’t make the deal bad. Add the $1,711 of principal paid down in year one and 3% appreciation, and the year-one total return is about 15.1%. Cash-on-cash simply measures one part of it — the cash in your pocket.
Positive vs. Negative Leverage: The Loan Constant Test
The quickest way to know whether financing will raise or lower your cash-on-cash return is to compare the property’s cap rate with the loan constant — the annual mortgage payment as a percentage of the loan amount. If the cap rate is higher, every borrowed dollar earns more than it costs (positive leverage). If it’s lower, borrowing drags returns down (negative leverage), and a bigger down payment actually improves cash-on-cash return.
| Interest rate (30-year) | Loan constant | Cap rate needed for positive leverage |
|---|---|---|
| 5.0% | 6.44% | Above 6.44% |
| 6.0% | 7.19% | Above 7.19% |
| 6.5% | 7.58% | Above 7.58% |
| 7.0% | 7.98% | Above 7.98% |
| 7.5% | 8.39% | Above 8.39% |
| 8.0% | 8.81% | Above 8.81% |
| 8.5% | 9.23% | Above 9.23% |
With mortgage rates near 7%–8% in 2026, many rentals priced at 5%–7% cap rates are in negative leverage. Investors respond by buying below market, adding value through renovation, using longer amortization, or accepting thin early cash flow in exchange for loan paydown and appreciation. The calculator flags which side of the line your deal falls on.
What Is a Good Cash-on-Cash Return?
Many rental investors aim for roughly 8%–12% cash-on-cash return, but the right target depends on the market, the strategy and how much of the return you expect from growth rather than cash flow.
| Cash-on-cash return | How investors usually read it |
|---|---|
| Below 0% | Negative cash flow — you’re paying monthly to hold the property; the case rests entirely on appreciation and paydown |
| 0%–4% | Thin cash flow, common in high-price markets and with today’s mortgage rates; little room for surprises |
| 4%–8% | Moderate; reasonable for stable, low-maintenance properties in growing areas |
| 8%–12% | The range many buy-and-hold investors target for a solid cash-flowing rental |
| 12%+ | Strong — often seen in value-add, BRRRR or smaller markets; verify the numbers and the risk |
Compare cash-on-cash return with what your cash could earn elsewhere with similar effort and risk. A 5% return that needs a landlord’s time and a property’s risk isn’t automatically better than a lower-yielding, hands-off investment.
What Counts as Cash Invested and Cash Flow?
| Item | Where it goes | Note |
|---|---|---|
| Down payment | Cash invested | The largest part for most financed purchases |
| Closing costs, points, loan fees | Cash invested | Leaving these out inflates the return |
| Repairs before renting | Cash invested | Upfront work to make the unit rentable |
| Mortgage principal and interest | Subtract from cash flow | Unlike cap rate, cash-on-cash includes debt |
| Vacancy, management, maintenance, reserves | Subtract from cash flow | Even if you self-manage, budget for it |
| Principal paydown and appreciation | Not included | Shown separately in year-one total return |
| Income tax and depreciation | Not included | Cash-on-cash is a pre-tax measure |
Cash-on-Cash Return vs. Cap Rate vs. ROI
All three describe returns on the same property; they just draw the boundaries in different places.
| Metric | Formula | Best for |
|---|---|---|
| Cash-on-cash return | Annual cash flow ÷ cash invested | Judging your leveraged, year-one cash income |
| Cap rate | NOI ÷ property value | Comparing properties regardless of financing |
| ROI | Total gain ÷ total investment | The whole return including appreciation and sale |
| Rental yield | Annual rent ÷ property price | Quick income screening, the standard measure in the UK and Australia |
| NOI | Effective gross income − operating expenses | The property’s income before financing, which every other metric starts from |
| DSCR | NOI ÷ annual debt service | Whether a lender will finance the rental |
How to Improve Cash-on-Cash Return (and Mistakes to Avoid)
Levers that move the number
- Negotiate the price. Use the “highest price for your target” figure as your walk-away offer.
- Raise income. Market-rate rents, parking, storage, pet rent or furnished units.
- Cut operating costs. Shop insurance, appeal the tax assessment, reduce turnover.
- Choose financing carefully. In negative leverage, a larger down payment or rate buydown can raise cash-on-cash.
- Add value. Renovate, then refinance (the BRRRR approach) to pull cash back out.
Mistakes that inflate the return
- Using the down payment alone as cash invested and ignoring closing costs and repairs.
- Assuming 100% occupancy and no maintenance or CapEx reserves.
- Using owner-occupied mortgage rates for an investment loan.
- Forgetting a higher property tax bill after the sale is reassessed.
- Treating appreciation as cash flow — it isn’t cash until you sell or refinance.
Keep Analyzing the Deal
Cash-on-cash return is one step in a full rental analysis. These tools cover the rest.
Cash-on-Cash Return FAQs
Divide the property’s annual pre-tax cash flow by the total cash you invested, then multiply by 100. Cash flow is rent minus vacancy, operating expenses and mortgage payments; cash invested is your down payment, closing costs and upfront repairs.
Many buy-and-hold investors target about 8%–12%. Lower returns can still make sense in high-appreciation markets, while value-add and BRRRR deals often aim higher. Judge it against your market, your risk and what the cash could earn elsewhere.
Cap rate is NOI divided by property value and ignores financing. Cash-on-cash return is cash flow after mortgage payments divided by the cash you invested. With positive leverage, cash-on-cash beats the cap rate; with negative leverage, it falls below it.
No. Cash-on-cash return measures only the annual cash flow you receive. ROI and total return also include loan principal paydown, appreciation and eventually the sale proceeds, so they’re usually higher than cash-on-cash for a financed rental.
No. It counts only cash that actually reaches you during the year. Appreciation and principal paydown build equity but aren’t cash until you sell or refinance, which is why the calculator shows them separately in year-one total return.
Yes. If expenses plus mortgage payments exceed rent, cash flow is negative and so is the cash-on-cash return — you’re paying each month to hold the property. This is common in expensive markets when rates are high.
Negative leverage happens when a property’s cap rate is lower than the loan constant (the annual mortgage payment as a share of the loan). Borrowing then reduces your cash-on-cash return, and putting more money down would actually increase it.
Yes. Closing costs, loan points and lender fees are cash you spend to acquire the property. Excluding them makes cash-on-cash return look better than it is.
It depends on leverage. With positive leverage, a smaller down payment raises cash-on-cash return. With negative leverage, a larger one raises it. The down-payment chart in the calculator shows which way your deal bends.
With no loan, cash flow equals NOI and cash invested equals the price plus closing costs and repairs, so cash-on-cash return is slightly below the cap rate. Set the down payment to 100% to model it.
It’s the number of years of cash flow needed to recover your cash invested: cash invested ÷ annual cash flow, or 100 ÷ cash-on-cash return. An 8% return pays back in 12.5 years from cash flow alone, not counting appreciation or a refinance.
Yes. It is free, needs no sign-up and runs entirely in your browser. Your prices, rents and loan details are not sent to DexoCalc or stored.
Manzoor Ahmad
13+ years of web development & SEO experience · Founder, DexoCalc
Manzoor builds and maintains every DexoCalc calculator, including the full mortgage and rental-investing libraries. This tool uses standard amortization math, separates cash flow from equity build-up, and compares cap rate with the loan constant so you can see exactly what financing is doing to your return.
Sources
Results are pre-tax estimates for education and planning, not investment or tax advice. Rents, expenses, financing and appreciation vary — verify with actual quotes, operating statements and a qualified professional before investing.