Calculator
Cash-on-Cash Return Calculator
Cash-on-cash return is annual pre-tax cash flow after debt service divided by the total cash an investor put in. If a property produces $50,000 of cash flow after the mortgage on $500,000 of equity, the cash-on-cash return is 10%.
Formula
How underwriters use it
Cash-on-cash is a one-year, levered yield. It shows what equity earns in cash before taxes, which is why it is popular with income-focused investors.
It ignores appreciation, principal paydown and the sale, so a value-add deal can have low early cash-on-cash and still a strong IRR.
Frequently asked questions
What is a good cash-on-cash return?
Many real estate investors look for roughly 6% to 10% on stabilized assets, accepting less in high-growth markets and wanting more on riskier assets. It should be compared with the cap rate to see whether leverage is helping or hurting.
How is cash-on-cash different from cap rate?
Cap rate is unlevered and measured on value. Cash-on-cash is levered and measured on the equity actually invested, so financing terms change it directly.
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