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Investing

Cash-on-Cash Return

Also called cash-on-cash, CoC return

In short

Cash-on-cash return is a property's annual pre-tax cash flow divided by the total cash the investor put in. It measures the yield on your own money after financing.

Formula
Annual cash flow ÷ cash invested
Includes
Mortgage payments
Cash invested
Down payment, costs, repairs
Ignores
Appreciation and paydown

How to calculate it

Cash-on-cash return = annual pre-tax cash flow ÷ total cash invested × 100.

Annual cash flow is net operating income minus yearly loan payments. Total cash invested includes your down payment, closing costs, upfront repairs and any loan points.

Why investors use it

Cash-on-cash return shows how hard your money is working and lets you compare a rental with other uses of the same cash. Leverage can push it above the cap rate when borrowing costs are low relative to the property's income, or below it when they're high.

What it leaves out

It doesn't count appreciation, principal paydown or tax effects, and it's based on one year. A BRRRR deal that returns most of your cash at refinance can show a very high or even undefined cash-on-cash return because so little cash stays in the deal.

The formula

Cash-on-cash return = Annual pre-tax cash flowTotal cash invested × 100
Annual pre-tax cash flow
Net operating income minus a year of mortgage payments
Total cash invested
Down payment, closing costs and upfront repairs
Try it in the Rental Property ROI Calculator →
Example

Cash-on-cash on a financed rental

An investor buys a $200,000 rental with $50,000 down, $6,000 in closing costs and $9,000 in repairs: $65,000 invested. NOI is $16,800 a year and loan payments are $11,400 a year. Cash flow = $16,800 - $11,400 = $5,400. Cash-on-cash return = $5,400 ÷ $65,000 ≈ 8.3%.

Cash-on-Cash Return vs. Capitalization Rate (Cap Rate)

Cash-on-Cash Return

Cash-on-cash return is a property's annual pre-tax cash flow divided by the total cash the investor put in. It measures the yield on your own money after financing.

Capitalization Rate (Cap Rate)

Capitalization rate (cap rate) is a rental property's net operating income divided by its value or price. It shows the property's unleveraged annual return and is used to compare income properties.

The differenceCap rate measures NOI against the property's price and ignores financing; cash-on-cash return measures cash flow after debt against only the cash you invested.

Frequently Asked Questions

Related terms

Net Operating Income (NOI)InvestingNet operating income (NOI) is a rental property's yearly income minus its operating expenses, before mortgage payments, depreciation and income taxes. It is the basis for cap rate.BRRRR MethodInvestingThe BRRRR method is a rental investing strategy: buy a distressed property, rehab it, rent it, refinance based on the higher value, and repeat with the cash pulled out.Down PaymentMortgages & financingA down payment is the part of a home's purchase price the buyer pays upfront in cash rather than borrowing. It is usually stated as a percentage of the price and is due at closing.Closing CostsBuying & closingClosing costs are the fees and prepaid expenses paid to complete a real estate purchase, beyond the price and down payment. Buyers typically pay about 2% to 5% of the loan or purchase price.Hard Money LoanMortgages & financingA hard money loan is a short-term loan from a private lender, secured mainly by the property's value rather than the borrower's income. Investors use it to buy and renovate properties quickly.RefinanceMortgages & financingTo refinance is to replace an existing mortgage with a new one, usually to get a lower rate, change the loan term, or take cash out of the home's equity.After Repair Value (ARV)InvestingAfter repair value (ARV) is the estimated market value of a property once planned repairs and renovations are complete. Investors use it to decide how much to pay for a fixer-upper.PITIMortgages & financingPITI stands for principal, interest, taxes and insurance, the four parts of a typical monthly mortgage payment. Lenders use it to judge whether a borrower can afford a home.

Learn more in the knowledge base

How to Finance a Foreclosure or Distressed PropertyGuide · 7 min readDistressed properties are harder to finance than move-in-ready homes. Condition, timing and the seller's terms all limit which loans will work. This guide matches financing options to each kind of distressed purchase and explains the trade-offs.How to Evaluate a Pre-Foreclosure DealGuide · 6 min readOnce an owner is interested in selling, you can replace rough screening estimates with real numbers. This guide walks through confirming what is owed, finding every lien, assessing condition and repairs, estimating value, and turning those figures into a maximum price you will not go above.Closing Costs Explained: What Buyers Pay and WhyGuide · 9 min readClosing costs are the fees and prepaid expenses due when a purchase completes, on top of the down payment. They vary by state, loan and price, and some are negotiable. This guide explains each category, how to read your disclosures and how to keep costs down.
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Disclaimer: The information on this page is for general educational purposes only and is not legal, financial, tax or investment advice. Laws, lending rules and market conditions vary by state and change over time, and any figures shown are estimates. Before you buy, sell, finance or bid on a property, consult a qualified attorney, financial advisor, lender or licensed real estate professional about your situation.