Short answer: Cash-on-Cash Return = Annual Pre-Tax Cash Flow ÷ Total Cash Invested. Most buy-and-hold investors target 8%+.
Formula
Cash-on-Cash = Annual Pre-Tax Cash Flow ÷ Total Cash Invested
Cash-on-Cash Return
10.00%
Strong. Above the 10% threshold most U.S. buy-and-hold investors target.
How to use this calculator
- 1Compute annual pre-tax cash flow. NOI minus annual mortgage payments. Positive means the property pays you every month.
- 2Sum the total cash invested. Down payment + closing costs + initial rehab / make-ready.
- 3Divide. Cash-on-Cash = Annual Cash Flow ÷ Total Cash Invested.
- 4Compare against 8% target. Below 8% typically means the deal is appreciation-driven; above 10% is strong for most U.S. markets.
FAQ
What is a good Cash-on-Cash Return?
Most U.S. buy-and-hold investors target 8%+ Cash-on-Cash. Anything below 5% usually means the property is appreciation-driven rather than cash-flow-driven.
Why is Cash-on-Cash lower than Cap Rate?
Cash-on-Cash factors in the mortgage payment (principal + interest), which Cap Rate ignores. When financing is expensive, Cash-on-Cash is typically lower than Cap Rate.
Does Cash-on-Cash include principal pay-down?
No — the classic definition is pre-tax cash flow only. Principal pay-down is captured separately as equity build.