Cash-on-Cash Return Calculator: Your Real Return With Financing

Last updated: August 17, 2026 · Reviewed by the DoCalc team

What Is Cash-on-Cash Return?

Cash-on-cash return measures your annual pre-tax cash flow against the actual cash you invested — down payment plus closing costs, not the full purchase price. Unlike cap rate, it fully accounts for your mortgage payment, which makes it the more personal, financing-specific way to evaluate a leveraged deal.

The Formula

Cash Invested = Down Payment + Closing Costs Annual Cash Flow = (Effective Rent − Operating Expenses) − Annual Debt Service Cash-on-Cash Return = Annual Cash Flow ÷ Cash Invested

Effective rent accounts for expected vacancy, and annual debt service is your yearly mortgage principal & interest payments — the piece cap rate leaves out entirely.

Worked Example

A $300,000 property with 25% down ($75,000) plus $6,000 closing costs means $81,000 cash invested. At 7% on the $225,000 loan, annual debt service is about $17,963. With $30,000 gross rent, 5% vacancy, and $7,000 expenses, annual cash flow comes to roughly $3,537 — a cash-on-cash return of about 4.37%, a reminder that leverage cuts both ways: the mortgage payment consumes most of this property's cash flow at this rate and down payment combination.

Cash-on-Cash vs. Cap Rate

Metric	Accounts for financing?	Best for
Cap Rate	No	Comparing properties regardless of how each is financed
Cash-on-Cash Return	Yes	Your actual out-of-pocket return on a specific loan structure

The two often move in opposite directions when leverage changes: a larger down payment lowers debt service (helping cash flow) but raises cash invested (the denominator) — the net effect on cash-on-cash return isn't always intuitive, which is exactly why it's worth calculating directly rather than estimating.

Pros and Cons of Cash-on-Cash Return

Pros: it reflects your real, personal return given your actual financing terms — the number that matters most for your own bank account.

Cons: it's financing-dependent, so it can't be used to compare properties on equal footing the way cap rate can — two identical properties bought with different down payments will show different cash-on-cash returns.

Who Should Use This Calculator

Use it if you're financing a rental purchase and want to know your real annual return on the cash you're actually putting in. Pair it with Cap Rate to separately evaluate the property itself, independent of how you choose to finance it.

Frequently Asked Questions

What's a good cash-on-cash return?

6-10% is commonly considered solid for a financed rental property, though it varies by market and risk tolerance. Above 10% is strong; below 6% is often considered thin, though still potentially worthwhile for lower-risk properties.

How is cash-on-cash return different from ROI?

Cash-on-cash return is a specific type of ROI focused on annual cash flow relative to cash invested — it excludes appreciation, tax benefits, and principal paydown, which broader ROI calculations sometimes include.

Does a bigger down payment improve cash-on-cash return?

Not necessarily — it lowers your mortgage payment (helping cash flow) but also increases the cash invested (the denominator), so the net effect depends on your specific rate, rent, and expenses. Try adjusting the down payment slider to see the effect directly.

What counts as cash invested?

Down payment plus closing costs, and any immediate repair or rehab costs if applicable — essentially all upfront cash required to acquire and prepare the property for rent.

Does cash-on-cash return include principal paydown as a return?

No — this calculator measures pre-tax cash flow only. Principal paydown is real equity building but isn't cash in your pocket each year, so it's tracked separately, not folded into this percentage.

Why would I use this instead of cap rate?

Use cash-on-cash return when you're financing the purchase and want to know your actual return on the cash you're putting in. Use cap rate to compare the property itself against others, independent of financing choices.

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