Cash On Cash Return Calculator: Is That Rental Worth It?
Instantly analyze your real estate deal's annual yield versus the stock market.
4 min423 words
Calculate cash on cash return with our free online tool. Get instant results with helpful explanations and tips for better understanding.
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Cash On Cash Return Calculator
Calculate cash on cash return with our free online tool. Get instant results with helpful explanations and tips for better understanding.
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What is Cash on Cash Return?
Cash on Cash Return is a rate of return ratio that calculates the total cash earned on the total cash invested in a property. It is widely used in real estate investing to measure the performance of an investment.
How to use
Enter your annual pre-tax cash flow and the total cash you actually invested (down payment, closing costs, rehab costs). The calculator will show your percentage return.
Frequently Asked Questions
What is Cash on Cash Return?
Cash on Cash Return (CoC) is a metric used in real estate to calculate the cash income earned on the cash invested in a property. It measures the annual return made on the property relative to the amount of mortgage paid during the same year.
How is Cash on Cash Return calculated?
The formula is: (Annual Pre-Tax Cash Flow / Total Cash Invested) x 100. Annual Pre-Tax Cash Flow is Net Operating Income (NOI) minus debt service (mortgage payments). Total Cash Invested includes down payment, closing costs, and renovation expenses.
What is considered a 'good' Cash on Cash Return?
While 'good' varies by market and risk tolerance, generally, a return between 8% to 12% is considered solid for rental properties. Investors seeking higher risk/reward might look for 15% or higher.
What is the difference between Cash on Cash Return and ROI?
ROI (Return on Investment) typically accounts for the total profit over the entire lifespan of the investment, including appreciation and equity paydown. Cash on Cash Return strictly measures the immediate cash flow relative to the actual cash invested in a specific year.
What expenses should I include in Operating Expenses?
You should include all costs necessary to maintain and operate the property, excluding mortgage principal and interest. Common expenses include property taxes, insurance, maintenance, vacancy allowance, property management fees, and utilities (if paid by the owner).
Does Cash on Cash Return account for property appreciation?
No. Cash on Cash Return only looks at the cash flow generated by the property (rent minus expenses). It does not include potential profit from selling the property at a higher price in the future (appreciation) or the reduction of the loan balance (principal paydown).
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