Saving & Investing

Cash-on-Cash Return

A rental property’s annual pre-tax cash flow divided by the actual cash invested.

What does cash-on-cash return mean?

Unlike cap rate, cash-on-cash return accounts for financing — it measures the return on the money you actually put in (down payment and costs), not the full property value. It’s a key gauge of a leveraged real-estate investment.

Put it to use

Investment Property Calculator An investment property can be an excellent investment. This calculator is designed to examine the potential return you might receive from an investment property.

Cash-on-Cash Return — frequently asked

How do I calculate cash-on-cash return?

Divide annual pre-tax cash flow by the total cash you invested. If a rental nets $6,000 a year on $60,000 of cash in (down payment plus costs), the cash-on-cash return is 10%.

How is cash-on-cash different from cap rate?

Cap rate ignores financing and measures a property’s unleveraged yield; cash-on-cash includes your mortgage and reflects the return on the actual cash you put in. Leverage can push cash-on-cash above the cap rate.

All glossary terms