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Cash-on-Cash Return Calculator

See how much cash a rental property pays you back each year, before taxes, for every dollar you put in, after running costs and loan payments.

Level: Grade 7

  • Common Core standard 7.RP.A.3Use proportional relationships to solve multistep ratio and percent problems. Examples: simple interest, tax, markups and markdowns, gratuities and commissions, fees, percent increase and decrease, percent error.
Printable worksheet

Cash-on-Cash Return Calculator

Know the answer you need? Pick an input to work backward.

Inputs

Renovation, furnishing or reserves you pay in cash at the start. Use 0 if none.

Rent and other income you actually expect to collect, after vacancy.

Taxes, insurance, management, repairs and other running costs. Not the loan payment.

Principal and interest on the mortgage. Use 0 for an all-cash purchase.

Result

Cash-on-cash return

12%

$70,000.00 of cash producing $8,400.00 a year is a cash-on-cash return of 12%.

Annual pre-tax cash flow
$8,400.00
Monthly pre-tax cash flow
$700.00
Total cash invested
$70,000.00
Annual debt service
$15,600.00

See the step-by-step solution ↓

Step-by-step solution

  1. Total cash invested: everything you paid in cash to buy and prepare the property

    $60,000.00+$6,000.00+$4,000.00=$70,000.00

  2. Find a year of loan payments (debt service): the monthly payment times 12

    $1,300.00×12=$15,600.00

  3. Find the yearly cash flow before taxes: the income, minus running costs, minus the loan payments

    $36,000.00−$12,000.00−$15,600.00=$8,400.00

  4. Divide the yearly cash flow by the cash you put in, to see what each dollar earns. As a percent, this is the cash-on-cash return

    CoC=$8,400.00$70,000.00=0.12=12%

Test yourself

20 quick questions built from this calculator's formula: work out results, predict what happens when an input changes, and work backward from an answer. Every answer comes with the working.

Please note: Results are estimates for planning and comparison. Lenders, banks, and tax authorities may round differently or include fees not modeled here, so confirm figures with your provider before deciding.

What this calculator does

See how much cash a rental property pays you back each year for every dollar you put in. Cash-on-cash return answers that question for anyone buying a rental with a loan. It tells you how many cents come back to you each year for every dollar you put in.

It divides one year of cash flow, before income tax, by the total cash you put in to buy the property and get it ready. Cash flow is the money left over after the bills and loan payments are paid.

The cap rate (another common rental measure) ignores the loan. Cash-on-cash return is different: it includes your mortgage payments. So it measures your own return, based on how you're paying for the property. It also lets you see how a bigger or smaller down payment changes what you earn on your money.

Where it's used

Why this math matters outside the classroom:

  • Rental property return. A property producing $6,000 of yearly pre-tax cash flow on $80,000 of cash invested has a 7.5% cash-on-cash return.
  • Comparing financing. Investors compare a larger and a smaller down payment by how much yearly cash flow each dollar of cash produces.
  • Short-term rentals. Hosts subtract cleaning, fees and loan payments from booking income before dividing by the cash they put in.
  • Renovation choices. Owners check whether spending $10,000 on upgrades raises yearly cash flow enough to keep the return where they want it.

Grade level and standards: Grade 7; Common Core State Standards for Mathematics 7.RP.A.3. © Copyright 2010. National Governors Association Center for Best Practices and Council of Chief State School Officers. All rights reserved.

How to use it

  1. Enter the down payment, the closing costs and any repairs or other upfront cash you'll spend.
  2. Enter the rental income you expect to collect in a year, after allowing for empty months (vacancy).
  3. Enter the yearly running costs and the monthly loan payment (principal and interest).
  4. Read the cash-on-cash return, the yearly and monthly cash flow and the total cash you put in.

What the inputs mean

Repairs and other upfront cash
Renovation, furnishing or reserves you pay in cash at the start. Use 0 if none.
Annual rental income collected
Use the income you'll realistically collect, not the advertised rent with every unit always full. Taking off an allowance for empty months first gives a more honest result.
Annual operating expenses
Property taxes, insurance, management fees, maintenance, utilities you pay as the owner and money set aside for repairs. Your lender may collect taxes and insurance with the loan payment, in an escrow account. If so, include them here, and enter only principal and interest as the loan payment.
Monthly loan payment
The monthly principal and interest payment. Principal is the part that pays down the loan. The loan payment calculator can work this out from the loan amount, rate and term.

Formula and method

Cash invested = Down payment + Closing costs + Other upfront cash
Debt service = Monthly loan payment × 12
Cash flow = Income − Operating expenses − Debt service
Cash-on-cash return = Cash flow ÷ Cash invested × 100

Cash invested is all the cash you paid at the start. Debt service is a year of loan payments. Operating expenses are the yearly running costs. All income and expense figures are yearly and before income tax.

Debt service includes both the interest and the principal part of the loan payment, since both leave your bank account.

The result is a percentage of your own cash. So borrowing more usually raises cash-on-cash return when the property earns more than the loan costs. It lowers it when the loan is expensive compared with the rent.

Worked example

You buy a rental house with a $60,000 down payment, $6,000 of closing costs and $4,000 of repairs. It should collect $36,000 a year, operating expenses are $12,000 a year, and the mortgage payment is $1,300 a month.

  1. Cash invested: $60,000 + $6,000 + $4,000 = $70,000.
  2. Debt service: $1,300 × 12 = $15,600.
  3. Cash flow: $36,000 − $12,000 − $15,600 = $8,400 a year, or $700 a month.
  4. Cash-on-cash return: $8,400 ÷ $70,000 = 0.12, or 12.00%.

Result: The property returns 12.00% a year on the $70,000 of cash you put in, before taxes.

Understanding the result

Compare the result with what the same cash could earn elsewhere, with a similar amount of risk and effort. A rental also takes your time, and it carries risks that a savings account doesn't.

A negative result means the property costs you money each year, before taxes. Some investors accept that because they expect the property to rise in value. But it's worth knowing in advance.

Assumptions and limitations

  • The figures describe a typical full year of owning the property.
  • The loan payment stays the same for the year.
  • All upfront cash counts as invested, including costs that don't add to the property's value.
  • No rounding is applied inside the calculation.
  • Income taxes, depreciation (a tax deduction for wear on the building) and other tax effects aren't included.
  • A rise in the property's value, and the share of it you own as you pay down the loan, don't count as return here. Only cash in hand does.
  • It's a one-year measure. It doesn't allow for rent increases, major repairs or selling the property someday.

Frequently asked questions

What is the difference between cash-on-cash return and cap rate?

Cap rate divides net operating income (income minus running costs) by the property's full price, and ignores the loan. Cash-on-cash return divides the cash flow left after loan payments by only the cash you put in. On a property bought with a loan, the two can differ a lot.

Should principal repayment count as an expense?

In cash-on-cash return, yes. The full loan payment is cash leaving your pocket each month, even though the principal part builds equity (the share of the property you own outright). That equity shows up in measures such as total return, not here.

What is a good cash-on-cash return?

It depends on the market, the property and your other choices. Rather than aim for a fixed number, compare the result with your other options. Then test it with lower rent and higher costs.

How can I raise my cash-on-cash return?

Higher rent, lower running costs or a cheaper loan all raise cash flow. Putting less cash down can also raise the percentage. But it raises the loan payment, and the risk if rents fall.

How this calculator is checked

Method: Standard real estate definition: annual pre-tax cash flow ÷ total cash invested. The calculation is covered by automated tests with known reference values and edge cases. Last updated 2026-10-18. Found a problem? Tell us.

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