Cash-on-Cash Return Calculator: How to Measure Real Rental Property Performance

Cash-on-cash return (CoC) is the single best metric for evaluating leveraged rental property performance. Unlike cap rate, which assumes all-cash purchases, cash-on-cash return measures the actual cash flow you receive against the actual cash you invested.

This is how professional investors evaluate deals. If you're using debt to buy rental properties—which most investors do—cash-on-cash return tells you what you're really earning on your money.

What Is Cash-on-Cash Return?

Cash-on-cash return measures your annual pre-tax cash flow as a percentage of total cash invested. It answers one simple question: "What return am I getting on the money I actually put into this deal?"

The formula:

Cash-on-Cash Return = (Annual Pre-Tax Cash Flow / Total Cash Invested) × 100

Annual pre-tax cash flow = Net operating income - debt service (mortgage payments)

Total cash invested = Down payment + closing costs + initial repairs/capex

Real Example Calculation

Let's walk through a complete example.

Property: 4-unit multifamily in Charlotte, NC

• Purchase price: $480,000
• Down payment (25%): $120,000
• Closing costs: $8,500
• Immediate repairs: $12,000
• Total cash invested: $140,500

Loan details:

• Loan amount: $360,000
• Interest rate: 6.75%
• Term: 30 years
• Monthly payment: $2,334
• Annual debt service: $28,008

Income and expenses:

• Gross rental income: $4,800/month × 12 = $57,600
• Vacancy (7%): -$4,032
• Effective gross income: $53,568

Operating expenses:

• Property taxes: $5,760
• Insurance: $2,400
• Property management (9%): $4,821
• Maintenance: $3,500
• Utilities (common areas): $1,200
• Landscaping: $800
• Total operating expenses: $18,481

Cash flow calculation:

• Effective gross income: $53,568
• Operating expenses: -$18,481
• Net operating income: $35,087
• Debt service: -$28,008
• Annual pre-tax cash flow: $7,079

Cash-on-cash return:

$7,079 / $140,500 = 0.0504 = 5.04%

This property delivers a 5.04% cash-on-cash return.

What's a Good Cash-on-Cash Return in 2026?

Target CoC returns depend on market, property type, and your strategy:

Conservative benchmarks:

• 6-8%: Decent for stable, Class A properties in appreciating markets
• 8-10%: Good for most markets and property types
• 10-12%: Strong returns, typical for value-add or secondary markets
• 12-15%+: Excellent, usually requires value-add or higher-risk markets

Current reality in 2026:

With mortgage rates at 6.5-7%, achieving 8%+ cash-on-cash returns is challenging in major metros. Many investors accept 4-6% CoC returns in strong markets if they expect appreciation.

By market tier:

• Tier 1 metros (NYC, SF, LA, Seattle): 3-6%
• Tier 2 growth markets (Austin, Charlotte, Phoenix): 5-8%
• Tier 3 and Midwest markets: 7-10%
• Rural and emerging markets: 8-12%+

By strategy:

• Buy-and-hold stabilized: 5-8%
• Light value-add: 8-12%
• Heavy value-add/BRRRR: 12-15%+
• Turnkey remote investing: 4-7%

Remember: Higher CoC usually means higher risk, more work, or less appreciation potential.

Cash-on-Cash vs. Cap Rate vs. ROI

New investors confuse these metrics. Here's the difference:

Cap Rate

• Formula: NOI / Property Value
• Assumes: All-cash purchase
• Ignores: Financing, appreciation, taxes
• Best for: Comparing properties, market analysis

Cash-on-Cash Return

• Formula: Cash Flow / Cash Invested
• Assumes: Leveraged purchase
• Ignores: Appreciation, principal paydown, taxes
• Best for: Evaluating actual returns on leveraged deals

Total ROI

• Includes: Cash flow + appreciation + loan paydown + tax benefits
• Most comprehensive but requires assumptions
• Best for: Long-term investment analysis

Example showing all three:

Property: $300,000 purchase, $50,000 down (25%)

• NOI: $24,000
• Debt service: $19,000
• Cash flow: $5,000
• Annual appreciation: $9,000 (3%)
• Principal paydown: $3,500

Cap rate: $24,000 / $300,000 = 8%

Cash-on-cash: $5,000 / $50,000 = 10%

Total ROI: ($5,000 + $9,000 + $3,500) / $50,000 = 35%

Same property, wildly different numbers. Each metric tells you something different.

How to Calculate Cash-on-Cash Return: Step-by-Step

Step 1: Calculate Total Cash Invested

Include everything you paid upfront:

Down payment

• Conventional: typically 20-25%
• FHA (owner-occupied): 3.5%
• Commercial: 25-30%

Closing costs (typically 2-5% of purchase price):

• Lender fees
• Title insurance
• Escrow fees
• Appraisal
• Inspection
• Attorney fees
• Recording fees

Immediate capital expenditures:

• Repairs needed before renting
• Deferred maintenance
• Value-add improvements

Reserves (if required by lender):

• Sometimes lenders require 2-6 months PITI in reserves

Example:

• Purchase price: $250,000
• Down payment (20%): $50,000
• Closing costs: $7,500
• Roof repair: $8,000
• Paint and flooring: $5,000
• Total cash invested: $70,500

Step 2: Calculate Net Operating Income (NOI)

Start with gross rental income:

• Market rent × 12 months

Subtract vacancy allowance:

• Typical: 5-10% of gross rent
• Research local market average
• Use higher % for Class C or unstable areas

Subtract operating expenses:

• Property taxes
• Insurance (landlord policy)
• Property management (8-10% if self-managing, still account for your time)
• Maintenance and repairs
• HOA fees (if applicable)
• Utilities you pay
• Landscaping
• Pest control
• Trash removal
• Marketing/advertising

Don't subtract:

• Mortgage payments
• Capital expenditures
• Depreciation

Example:

• Gross rent: $2,200 × 12 = $26,400
• Vacancy (8%): -$2,112
• Effective gross income: $24,288
• Operating expenses: -$8,900
• NOI: $15,388

Step 3: Calculate Annual Debt Service

This is your total annual mortgage payments (principal + interest).

Monthly payment formula:

P = L[c(1 + c)^n] / [(1 + c)^n - 1]

Where:
P = Monthly payment
L = Loan amount
c = Monthly interest rate (annual rate / 12)
n = Total number of payments (years × 12)

Or just use an online mortgage calculator.

Example:

• Loan: $200,000
• Rate: 7%
• Term: 30 years
• Monthly payment: $1,331
• Annual debt service: $15,972

Step 4: Calculate Annual Cash Flow

Cash Flow = NOI - Annual Debt Service

Example:

• NOI: $15,388
• Debt service: -$15,972
• Cash flow: -$584

This property has negative cash flow. CoC return is negative.

Step 5: Calculate Cash-on-Cash Return

CoC = (Cash Flow / Total Cash Invested) × 100

Example:

• Cash flow: -$584
• Cash invested: $70,500
• CoC return: -0.83%

This is a money-losing property on a cash flow basis, even though it might have other benefits (appreciation, tax advantages).

Real-World Examples from Different Markets

Example 1: Cleveland Duplex (Cash Flow Play)

Purchase: $145,000

• Down payment (25%): $36,250
• Closing costs: $4,000
• Minor repairs: $3,500
• Total invested: $43,750

Financing:

• Loan: $108,750 at 7.25% for 30 years
• Monthly payment: $742
• Annual debt service: $8,904

Income:

• Unit 1: $900/month
• Unit 2: $850/month
• Gross: $21,000
• Vacancy (10%): -$2,100
• Effective income: $18,900

Expenses:

• Taxes: $2,320
• Insurance: $1,200
• Management: $1,890
• Maintenance: $1,500
• Utilities: $800
• Total: $7,710

Cash flow:

• NOI: $11,190
• Debt service: -$8,904
• Cash flow: $2,286

CoC return: $2,286 / $43,750 = 5.22%

Modest cash flow, but Cleveland has limited appreciation. You're buying for yield, not growth.

Example 2: Austin SFR (Appreciation Play)

Purchase: $525,000

• Down payment (20%): $105,000
• Closing costs: $11,000
• Total invested: $116,000

Financing:

• Loan: $420,000 at 6.5% for 30 years
• Monthly payment: $2,655
• Annual debt service: $31,860

Income:

• Rent: $3,200/month
• Gross: $38,400
• Vacancy (5%): -$1,920
• Effective income: $36,480

Expenses:

• Taxes: $9,450
• Insurance: $2,800
• Management: $3,648
• Maintenance: $2,500
• HOA: $1,200
• Total: $19,598

Cash flow:

• NOI: $16,882
• Debt service: -$31,860
• Cash flow: -$14,978

CoC return: -$14,978 / $116,000 = -12.9%

Terrible cash flow, but Austin properties appreciated 8-12% annually from 2020-2024. Investors bet on appreciation, not cash flow. (Risky strategy in 2026.)

Example 3: Indianapolis Fourplex (Balanced)

Purchase: $380,000

• Down payment (25%): $95,000
• Closing costs: $8,500
• Deferred maintenance: $15,000
• Total invested: $118,500

Financing:

• Loan: $285,000 at 7% for 30 years
• Monthly payment: $1,897
• Annual debt service: $22,764

Income:

• 4 units at $975 average
• Gross: $46,800
• Vacancy (8%): -$3,744
• Effective income: $43,056

Expenses:

• Taxes: $4,940
• Insurance: $2,600
• Management: $4,306
• Maintenance: $3,200
• Water/sewer: $2,400
• Landscaping: $600
• Total: $18,046

Cash flow:

• NOI: $25,010
• Debt service: -$22,764
• Cash flow: $2,246

CoC return: $2,246 / $118,500 = 1.90%

Low cash flow, but Indianapolis offers moderate appreciation (3-5%) plus this property has upside in rents.

How Leverage Affects Cash-on-Cash Return

Leverage can amplify or destroy your CoC return. Here's the same property with different down payments:

Property: $200,000 purchase, $16,000 NOI

Scenario 1: 100% Cash

• Cash invested: $200,000
• Debt service: $0
• Cash flow: $16,000
• CoC: 8%

Scenario 2: 25% Down at 6% Rate

• Cash invested: $50,000
• Loan: $150,000
• Debt service: $10,797
• Cash flow: $5,203
• CoC: 10.4%

Scenario 3: 25% Down at 8% Rate

• Cash invested: $50,000
• Loan: $150,000
• Debt service: $13,228
• Cash flow: $2,772
• CoC: 5.5%

Scenario 4: 10% Down at 7% Rate

• Cash invested: $20,000
• Loan: $180,000
• Debt service: $14,270
• Cash flow: $1,730
• CoC: 8.7%

Key insight: Leverage improves CoC return only when cap rate exceeds mortgage rate. In 2026, many markets have cap rates below mortgage rates, making leverage less attractive than in previous years.

Common Cash-on-Cash Return Mistakes

1. Forgetting Closing Costs and Repairs

Investors calculate CoC using only the down payment. If you put $60,000 down but spent $12,000 on closing and repairs, your real investment is $72,000.

Wrong: $4,000 / $60,000 = 6.7% Right: $4,000 / $72,000 = 5.6%

2. Using Gross Rent Instead of Net

CoC uses cash flow after all expenses and debt service, not gross rent.

3. Ignoring Property Management

"I'll manage it myself, so I won't count that expense."

Wrong. Your time has value. Even if self-managing, account for 8-10% management to get accurate CoC.

4. Unrealistic Vacancy Assumptions

Using 0-2% vacancy when the market average is 8%. This inflates your cash flow and CoC.

5. One-Time Income

Including a $5,000 lease-break fee in annual cash flow. CoC measures recurring returns.

6. Forgetting About Taxes

CoC is typically calculated on pre-tax cash flow, but you'll pay income tax on that cash flow. After-tax return is what you actually keep.

When to Use Cash-on-Cash Return

Best uses:

1. Comparing leveraged deals: Which of these three properties gives me the best return on my actual investment?

2. Evaluating cash flow: Will this property generate positive cash flow after debt service?

3. Testing leverage strategies: Should I put 20% down or 30% down?

4. Measuring performance: Is my property meeting my CoC target, or should I consider selling?

Limitations:

• Ignores appreciation (which may be 50%+ of total returns)
• Ignores principal paydown (typically adds 1-3% to annual returns)
• Ignores tax benefits (depreciation can save thousands)
• Ignores future rent growth
• Doesn't account for changing expenses or debt service (ARM loans)

Use CoC as one component of your analysis, not the only metric.

Improving Your Cash-on-Cash Return

If your CoC is below target, here's how to improve it:

1. Increase Income

• Raise rents to market rate
• Add laundry income
• Charge for parking or storage
• Add pet fees
• Bill back utilities

2. Decrease Operating Expenses

• Shop insurance annually
• Appeal property taxes
• Improve efficiency to reduce utilities
• Preventive maintenance reduces emergency repairs
• Longer tenant tenure reduces turnover costs

3. Refinance

• If rates drop, refinance to lower debt service
• Extend amortization to reduce monthly payment (but pay more interest)

4. Optimize Down Payment

• Sometimes 25% down yields better CoC than 20% if it avoids PMI
• Sometimes 10% down maximizes CoC if cap rate > mortgage rate

5. Buy Better Deals

• Negotiate lower purchase price
• Find value-add opportunities
• Buy in higher-yielding markets

Cash-on-Cash Return Calculator Spreadsheet

Build a simple spreadsheet with these inputs:

Inputs:

• Purchase price
• Down payment %
• Interest rate
• Loan term
• Closing costs
• Immediate repairs/capex
• Monthly rent
• Vacancy %
• Annual property taxes
• Annual insurance
• Management %
• Annual maintenance estimate
• Other expenses (HOA, utilities, etc.)

Calculations:

• Total cash invested = Down payment + closing costs + repairs
• Loan amount = Purchase price × (1 - down payment %)
• Monthly debt service = PMT function
• Annual debt service = Monthly × 12
• Effective gross income = (Monthly rent × 12) × (1 - vacancy %)
• Total operating expenses = Sum all annual expenses
• NOI = Effective gross income - operating expenses
• Annual cash flow = NOI - annual debt service
• CoC return = (Annual cash flow / total cash invested) × 100

Save this template and run scenarios on every property you evaluate.

The Bottom Line

Cash-on-cash return is the most practical metric for evaluating leveraged rental properties. It tells you what you're earning on the money you actually invested.

In 2026's market:

• 6%+ CoC is decent for stabilized properties
• 8-10% CoC is good
• 10%+ CoC is excellent

But don't chase CoC at the expense of everything else. A property with 4% CoC in a strong appreciation market may outperform a 10% CoC property in a declining market when you factor in total returns.

Calculate CoC on every deal. Use it to compare properties and evaluate leverage. But combine it with cap rate, total ROI analysis, and market fundamentals before making investment decisions.

The best investors don't just buy the highest CoC return—they buy the best risk-adjusted total return for their strategy and goals.