Cash-on-Cash Return Calculator: Measure Your Real Cash Yield

What Cash-on-Cash Return Measures

Cash-on-cash return measures annual pre-tax cash flow compared with the cash you invested in the deal. It is popular because it focuses on investor cash, not total property value.

This makes it different from cap rate. Cap rate ignores financing. Cash-on-cash return changes when the down payment, loan terms, closing costs, or repair budget changes.

Formula

Annual pre-tax cash flow is income after operating expenses and debt service. Total cash invested usually includes down payment, closing costs, upfront repairs, and any initial reserves.

Worked Example

If a property produces $4,800 in annual cash flow and the investor puts $80,000 into the deal, the cash-on-cash return is 6%.

If the same property requires $110,000 of cash because repairs are higher, the return falls to about 4.4%. The property did not change, but the investor cash requirement did.

When This Metric Helps

• Comparing two deals that use different down payments.
• Testing whether a larger down payment improves risk enough to justify lower liquidity.
• Evaluating the first-year cash yield of a stabilized rental.
• Separating property performance from appreciation assumptions.

Limitations

Cash-on-cash return does not include appreciation, principal paydown, tax effects, or sale proceeds. It is strongest as a near-term cash yield metric, not a full lifetime return model.

Use it with cap rate and DSCR. Cap rate helps compare properties. DSCR helps judge debt coverage. Cash-on-cash return helps judge the investor cash yield.

Frequently Asked Questions