Cash on cash return calculator
Cash-on-cash return is a rental's first-year cash flow, after the loan payments, divided by the cash you put in to buy it: the down payment plus the closing costs. Enter your numbers or fill them from an address.
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Optional: fills the price, rent estimate, taxes and HOA from the home's public Zillow page. Or just type your numbers.
Results for the worked example
- Down payment
- $55,000
- Closing costs
- $6,600
- Total invested
- $61,600
- NOI (a year)
- $15,076
- Loan payments (a year)
- $12,515
- Annual cash flow
- $2,561
- Monthly cash flow
- $213.42
Not financial advice. These figures are estimates for illustration: plain arithmetic on the inputs shown, several of which are assumptions or estimates (see inputs). The Zestimate and rent Zestimate are Zillow's estimates, not appraisals or offers. Check every input with a lender, an insurer and a local expert before you rely on it.
Not financial advice. The results are estimates for illustration: arithmetic on the numbers shown, some of which are assumptions. The Zestimate and rent Zestimate are Zillow's estimates. Check every input before you rely on it.
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How it's calculated
Cash-on-cash return = annual cash flow / total cash invested
The cash-on-cash formula
Start with the annual cash flow: the rent collected minus the operating expenses minus a year of loan payments. Divide it by the total cash invested and show it as a percentage.
Total cash invested is the down payment plus the closing costs. The loan isn't cash you put in, so it isn't counted; that is why a bigger loan can raise the return when the property earns more than the loan costs, and lower it when it doesn't.
Cash-on-cash return vs cap rate vs total return
The three answer different questions:
- Cap rate: what the property earns before financing, as a share of its price.
- Cash-on-cash return: what your cash earns in the first year, after the loan payments.
- Total return (the five-year projection): the cash flow plus the equity you build from paying the loan down and from appreciation, minus the cash you put in.
How leverage moves the number
Borrowing works in your favour when the property earns more on its price than the loan costs, and against you when it earns less. Compare the cap rate with the interest rate: when the cap rate is above the loan's rate, a bigger loan usually raises cash-on-cash return; when it is below, a bigger loan lowers it.
Try the same home with two down payments in the calculator. The cash flow and the cash invested both change, and the ratio between them tells you whether the extra borrowing pays for itself in the first year.
Year one versus the years after
The ratio describes the first year only. Rent usually changes over time, repairs come in uneven lumps, and a refinance can hand part of your investment back, which shrinks the denominator. Principal you repay builds equity but isn't cash in your pocket, so it never appears in this number.
That is why investors pair it with a longer view. The rental property calculator's projection adds the equity and appreciation for each of the next several years, at growth rates you choose.
When cash-on-cash return can't be worked out
With no down payment and no closing costs there is no cash invested, and the ratio is undefined. The calculator shows it as not available rather than an infinite or made-up number.
Worked example
Illustrative numbers, worked out with the same formulas as the calculator; the other inputs are the defaults below.
| Price | $220,000 |
|---|---|
| Monthly rent | $2,000 |
| Down payment | 25% |
| Interest rate (assumed) | 6.5%, 30 years |
| Closing costs | 3% of the price |
| Vacancy, management, maintenance, capex | 5%, 8%, 5%, 5% |
| Property tax, insurance (a year) | $2,400, $1,100 |
| Step | How | Result |
|---|---|---|
| Cash invested | down payment + closing costs | $61,600 |
| Net operating income (NOI) | effective gross income - operating expenses | $15,076 |
| Loan payments (a year) | monthly principal and interest x 12 | $12,514.95 |
| Annual cash flow | NOI - loan payments | $2,561.05 |
| Cash-on-cash return | annual cash flow / cash invested | 4.16% |
The inputs this calculator doesn't ask for keep their defaults. Every default and estimate is listed once, with its reason, in the rental property calculator's assumptions.
Cash-on-cash return calculator questions
What counts as cash invested?+
The down payment and the closing costs. Closing costs are a percentage of the price here, so to include repairs you pay before renting the home, raise that percentage by the repair cost divided by the price.
Is cash-on-cash return the same as ROI?+
It is one kind of return on investment: the first year's cash only. The five-year projection adds the equity from paying the loan down and from appreciation, for a fuller picture.
Can cash-on-cash return be negative?+
Yes. When the rent doesn't cover the expenses and the loan payments, the cash flow is negative and so is the return.
Why does a bigger down payment change it?+
A bigger down payment means a smaller loan and smaller payments, so more cash flow, but also more cash invested. The return can go up or down depending on the interest rate.
Should I compare it with a savings rate?+
Many investors do, because both describe a year of cash on cash put in. Remember that a rental also carries vacancy, repair and market risk that a deposit doesn't.
Does a high cash-on-cash return make the purchase a good idea?+
Not by itself. It looks at one year of cash and leaves out risk, your time and what the home may be worth later. Use it alongside qualified advice; this calculator isn't financial advice.
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- Rental analysis API referenceThe same analysis as JSON from your own code
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