Free Cash-on-Cash Return Calculator

What Is Cash-on-Cash Return?

Cash-on-cash return (CoC), often referred to as the “cash yield,” is a rate of return ratio that real estate investors use to assess potential investments. Your cash-on-cash return tells you what percentage of your initial cash investment is being returned to you in a year. The higher your cash-on-cash return, the sooner you can recoup your full investment.

How to Use the Cash-on-Cash Return Calculator

Our free cash-on-cash return calculator makes it easy to determine your cash-on-cash return, as well as NOI (net operating income), cap rate, and other crucial profit metrics. Simply download the CoC calculator and enter your property data into each of the highlighted cells.

Step 1. Enter Purchase Price and the Property’s Market Value

Enter the property’s market value and purchase price. Use the “Financed” column if you’ll be getting a loan or the “Cash” column if you don’t need financing.

Step 2. Enter Financing Amounts

If you’re a cash buyer, enter “100%” for the down payment and “0%” for the interest rate. Otherwise, enter the down payment, interest rate, and closing costs for your loan. To estimate your closing costs, use 2% of the purchase price.

Step 3. Enter Rent, Fixed and Variable Expenses

Add your gross monthly rent and tally your fixed and variable expenses. These might include property tax, utilities, landscaping, and insurance. Finally, enter your vacancy rate (typically 5% - 10% of your gross annual rent), maintenance rate, and property management rate.

Rent

Rent is the fixed amount your tenants will pay you each month. Find out how much you should charge for rent with tools like Rentometer or the BiggerPockets Rent Estimator.

Fixed Expenses

Fixed expenses are the costs you don’t expect to change throughout the year. These expenses include:

• Annual property taxes
• Annual insurance premiums
• Property management rate (usually 8% - 12% of total rent)

Variable Expenses

Variable expenses are costs that could change from month to month or at some point during the year. These expenses include:

• Annual utilities 
• Annual landscaping
• Vacancy rate (usually 8% to account for one month of vacancy)
• Maintenance rate (anywhere from 5% - 20% of rent)

Did you know that turnkey rentals have some of the lowest repair and maintenance

costs for rental properties? Check out Rent to Retirement’s fully-renovated and build-to-rent turnkey real estate investments today!

Step 4. Calculate Your Cash-on-Cash Return!

Now, you’ll see your cash-on-cash return! Our CoC return calculator provides you with four different figures: rental income (standard CoC), with depreciation, with appreciation, AND with loan paydown. Plus, you can see your CoC when buying the property in cash versus buying the property with a loan!

How to Calculate Cash-on-Cash Return (Formula)

Using our CoC calculator is the fastest and easiest way to find your cash-on-cash return, but you can also calculate cash-on-cash return by hand. The formula is simple:

Cash-on-Cash Return = Annual Before-Tax Cash Flow / Total Cash Investment

First, you will need to calculate your annual before-tax cash flow. Tally your yearly expenses, including your mortgage payments, and subtract them from your annual rental income. Next, divide this number by the total cash you invested in the property, which should include your down payment, closing costs, and any initial renovation/repair costs you had.

Cash-on-Cash Formula Example

Let’s say you buy a turnkey real estate investment for $300,000. With Rent to Retirement’s

5% down investor loans, you only need to put up $15,000 as your down payment. Add another $6,000 for closing costs (2%), and you’re all in for $21K.

Each year, this property brings in $30,000 in rent and costs you $21,000 in expenses and mortgage payments.

$30,000 - $21,000 = $9,000 in annual before-tax cash flow 

Next, we’re going to divide our annual cash flow by our all-in investment.

Cash-on-Cash Return = $9,000 (annual cash flow) / $21,000 (all-in cost) = 0.4285

That’s a 42.85% CoC return! In just over two years, you’ll have your entire investment returned!

Looking for high cash-on-cash rentals?

Why Cash-on-Cash Return Is Crucial

Cash-on-cash return is a useful metric because it tells you how long it will take to pay off your initial investment. A higher cash-on-cash return means a faster payback period, and the sooner you earn back your initial investment, the sooner you can buy more properties and scale your portfolio!

CoC also gives you a buffer to help cover large or unforeseen expenses, such as additional vacancies or major repairs. Rather than paying for these expenses out of pocket, you can deduct them from the property’s cash flow.

What Influences Cash-on-Cash Return?

Cash-on-cash return is determined by your rental income, expenses, and financing terms. Altering any of these factors can have a significant impact on your CoC:

• Purchase price: higher = lower CoC
• Rent price: higher = higher CoC
• Mortgage payment: higher = lower CoC
• Interest rate: higher = lower CoC
• Maintenance expenses: higher = lower CoC
• Property management fees: higher = lower CoC

Cash-on-Cash Return vs. ROI and Cap Rate

Because cash-on-cash return, return on investment (ROI), and cap rate are all annual return metrics represented as percentages, they are easily confused. But there are key differences between each calculation:

ROI (Return on Investment)

ROI measures your annual return relative to the total cost of the property, which may include both cash and debt. While CoC only measures net cash flow against an initial cash investment, ROI also accounts for appreciation, mortgage paydown, and tax benefits.

Cap Rate

Cap rate measures the stability of an investment property, but unlike CoC, it does not account for debt or cash invested in the property. To calculate cap rate, divide your annual net operating by the total property value.

Get Better Cash-on-Cash Returns with Rent to Retirement!

If you want a property that will pay back your initial investment as quickly as possible, consider a turnkey rental. These properties have lower maintenance and repair expenses and can often be bought with low money down. At Rent to Retirement, we have turnkey rentals available in several states and a team of experts who can help you find a high-return property!

Cash-on-Cash Return Calculator FAQs

How Do You Calculate Cash-on-Cash Return?

To calculate cash-on-cash return, determine your annual net cash flow and divide it by your total investment in the property (excluding debt). This percentage represents your annual return relative to your initial cash investment.

What Is a 10% Cash-on-Cash Return?

A 10% cash-on-cash return means you can expect to receive a 10% return on your initial cash investment in year one. For example, an annual net cash flow of $5,000 and an all-in investment of $50,000 would give you a 10% CoC return.

What Is a Good Cash-on-Cash Return?

Most real estate investors aim for a cash-on-cash return of 8% - 12%, although investors who are especially risk-averse might avoid properties with cash yields below 15%.