Cash-on-Cash Return Measures One Part of a Property Investment
Cash-on-cash return divides modeled annual cash flow by the cash invested. It focuses on current cash yield rather than appreciation, taxes, financing principal paydown or eventual sale proceeds.
Whether a given percentage is attractive depends on risk, financing, market, property condition, alternatives and the investor's objectives; the calculator does not impose a universal target.
Cash-on-cash return deliberately focuses on current cash income relative to the cash you invested. It does not count appreciation or the equity created by paying down mortgage principal, which is why it can look modest even when a property's total long-term return is stronger. The denominator matters just as much as the cash flow: include the down payment and other cash required to acquire the property consistently when comparing one deal with another.
Frequently Asked Questions
What is a good cash-on-cash return?
There is no universal target. Compare the modeled return with the property's risks, financing assumptions, expected capital needs and realistic alternatives.
Why is cash-on-cash return different from cap rate?
Cap rate measures NOI relative to property value before financing. Cash-on-cash uses after-debt-service cash flow relative to the cash you actually invested, so financing changes the result.
Methodology & Related Tools
Review how RatioCalc builds, tests and updates calculator models before using an estimate for a material decision.
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