Calculate the cash-on-cash return on your rental property investment. This metric measures your annual cash flow as a percentage of the actual cash you invested, making it the most practical way to compare rental property performance.
Operating Expenses include property taxes, insurance, vacancy allowance, property management, maintenance, and HOA fees (if applicable).
This return is acceptable but on the lower end. Consider if appreciation or other factors compensate.
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Cash-on-Cash Return measures the annual return on the actual cash you've invested in a property. It's one of the most important metrics for rental property investors because it shows your real yield.
Divide annual pre-tax cash flow by total cash invested. Cash invested includes down payment, closing costs, and any rehab costs. Cash flow is rent minus all expenses and debt service.
Cash-on-Cash Return = (Annual Cash Flow ÷ Total Cash Invested) × 100Target 8-12% for stabilized rentals. BRRRR deals often achieve 15-30%+ because you pull your cash out. In expensive markets, 5-7% may be acceptable if appreciation potential is strong.
Cash-on-Cash only measures cash returns, ignoring appreciation and principal paydown. Total Return = Cash-on-Cash + Appreciation + Principal Paydown + Tax Benefits. A property with 6% cash-on-cash might have 15%+ total return.
Cash-on-cash return measures annual cash flow as a percentage of the actual cash you invested. It is calculated as: Annual Cash Flow / Total Cash Invested × 100. It is the most practical measure of rental property performance.
Most investors target 8-12% cash-on-cash return. Some high-cash-flow markets can deliver 15%+, while appreciation markets (like California) may only yield 3-5% but offer equity growth.
Cap rate measures property performance without financing (NOI/Price). Cash-on-cash includes your financing and measures return on your actual cash investment. Cash-on-cash is more relevant if you use leverage.
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