Cash-on-Cash Return Calculator
Measure annual pre-tax cash flow against the cash you actually invested, including closing and renovation costs.
Content updated August 10, 2026
Cash-on-cash measures pre-tax cash flow against the cash you actually put in, so it reflects leverage. It ignores principal paydown, appreciation, tax treatment and eventual sale proceeds, which means it is a cash-flow measure rather than a total return. Estimates only, not investment advice.
Cash-on-cash return answers a narrow, practical question: of the money you actually handed over, how much comes back as cash in a year? It divides annual pre-tax cash flow by total cash invested — down payment plus closing costs plus any renovation spend.
Because it counts only cash you put in and cash you take out, it is the measure that reflects your financing. Two investors buying the identical property at the identical price will report different cash-on-cash returns if they borrowed differently.
The Cash-on-Cash Return formula
Cash-on-cash return = annual pre-tax cash flow ÷ total cash invested × 100annual pre-tax cash flow = net operating income − annual debt service · total cash invested = down payment + closing costs + renovation costs.
Worked example
On a 250,000 purchase with 25% down, 6,000 closing costs and 4,000 of renovation, total cash invested is 72,500. If net operating income is 16,680 and the 187,500 loan at 7% over 30 years costs about 14,964 a year, annual cash flow is roughly 1,716 — a cash-on-cash return of 1,716 ÷ 72,500 × 100 ≈ 2.37%.
Assumptions, rounding, and limitations
Assumptions
- Cash flow is pre-tax and equals net operating income minus annual debt service.
- Total cash invested is the down payment plus closing and renovation costs; no other acquisition costs are assumed.
- Debt service is a fixed-rate, fully amortizing monthly payment over the entered term.
- Rent, vacancy and operating expenses are held constant across the year.
Rounding: All values are computed at full floating-point precision. The return is displayed to two decimal places and currency amounts to the nearest whole unit.
Limitations
- Excludes principal paydown, appreciation, depreciation, income-tax treatment and sale proceeds, so it is not a total return.
- Covers a single year and does not project a holding period; an internal rate of return is the appropriate measure for that.
- Excludes capital expenditure reserves, which can turn a small positive cash flow negative in practice.
- With no cash invested the ratio is undefined rather than infinite in any meaningful sense, and is shown as such.
- This is a general analysis tool, not investment or tax advice.
Sources
- Financial Stability Report — Asset Valuations (capitalization rates) — Board of Governors of the Federal Reserve System
How leverage moves the number
Borrowing reduces the cash you invest, which shrinks the denominator, and adds debt service, which shrinks the numerator. Which effect wins depends on whether the property earns more than the loan costs.
When the cap rate is comfortably above the mortgage rate, leverage raises cash-on-cash return. When it is below, leverage lowers it and can turn a positive return negative. This is why the calculator shows the unleveraged cap rate alongside the result — the gap between them is the whole story of your financing.
What it deliberately leaves out
Cash-on-cash is a one-year, pre-tax, cash-only measure. It does not count the principal you pay down each month, which is real equity even though it is not cash in your pocket. It does not count appreciation. It does not count depreciation or any other tax treatment, and it does not count what you eventually net on sale.
That narrowness is a feature when you are asking whether a property sustains itself, and a serious limitation when you are asking whether it was a good investment. For a full-holding-period view, an internal rate of return over projected cash flows and a sale is the right tool.
Frequently asked questions
▶How do you calculate cash-on-cash return?
Divide annual pre-tax cash flow by total cash invested and multiply by 100. Cash flow is net operating income minus annual debt service; cash invested is the down payment plus closing and renovation costs.
▶What is a good cash-on-cash return?
There is no standard threshold. It depends on your market, your financing cost, and the returns available to you elsewhere at similar risk. Comparing against alternatives is more useful than comparing against a fixed target.
▶Does cash-on-cash return include principal paydown?
No. Principal paydown builds equity but is not cash you receive, so it sits outside this measure. That means cash-on-cash understates the total benefit of a leveraged rental.
▶What is the difference between cash-on-cash return and ROI?
Cash-on-cash counts only annual cash flow against cash invested. A full return on investment would also include principal paydown, appreciation and sale proceeds, which usually makes it substantially higher over a holding period.
▶What happens if I buy with all cash?
There is no debt service, so cash flow equals net operating income and cash invested equals the full purchase price plus costs. The cash-on-cash return then converges towards the cap rate, differing only by your closing and renovation spend.
Learn more
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Open calculator →Disclaimer: Cash-on-Cash Return Calculator results are estimates for general information and education only, and are not financial, tax, legal or medical advice. Verify important decisions with a qualified professional.