Cash-on-cash return measures the annual pre-tax cash flow from a property relative to the cash you personally put in.
Calculating it
Divide annual cash flow after debt service by total cash invested, including down payment, closing costs and initial repairs. A property throwing off $5,400 a year on $93,000 invested returns about 5.8%.
What is a good number?
Many investors target 8%–12% or higher, but acceptable levels depend on market, risk and appreciation potential. Compare to alternatives such as index funds, remembering that real estate requires work and carries concentrated risk.
Leverage effects
Debt can boost cash-on-cash returns if property yields exceed borrowing costs, but magnifies risk when rents fall or rates reset. Stress-test the deal under higher vacancy and expenses.
Try the numbers
Use our Cash-on-Cash Return Calculator to see this in practice. With its default example (Down payment: $75,000; Closing costs: $8,000; Rehab costs: $10,000), it shows cash-on-cash return: 5.81%. Adjust the inputs to match your situation.
Key takeaways
- Cash-on-cash = annual cash flow ÷ cash invested.
- Include all upfront costs in cash invested.
- Stress-test the deal.
This article is for general education and is not personalized financial, tax or legal advice. Rules and limits change; confirm current figures with official sources such as IRS.gov, SSA.gov and StudentAid.gov, or consult a qualified professional. © 2026 FinanzCalc.