The formula
Cash-on-cash return = annual pre-tax cash flow ÷ total cash invested
Annual pre-tax cash flow is rent minus every expense, including the mortgage payment. Total cash invested is your down payment plus closing costs plus any upfront rehab — the money that actually left your bank account.
Why investors watch it
Cash-on-cash answers a direct question: what return is my cash earning this year? You can compare it to a savings account, a bond, or a dividend stock. It also makes leverage visible — the same property with 25% down versus all cash produces very different cash-on-cash numbers.
Reading the result
- The calculator also shows years to recoup your cash (1 ÷ CoC). A 10% cash-on-cash return returns your capital in about 10 years from cash flow alone — everything after is on top of paydown and appreciation.
- Negative cash-on-cash means the property costs you money every year. That’s only a strategy if you’re deliberately betting on appreciation and can carry it.
Don’t optimize this number alone
Maximizing cash-on-cash pushes you toward cheaper properties in weaker markets with higher yields and higher risk. Balance it against location quality, rent-growth potential, and the full rental ROI picture.