Cash-on-Cash Return Calculator

What cash-on-cash return tells you

Cash-on-cash return shows how much cash a rental property pays back each year for every unit of your own money in it. Enter the annual pre-tax cash flow, what is left after rent has covered every operating cost and mortgage payment, and the total cash you invested, and the calculator returns the percentage. No market rates or tax rules are built in, so the figure can be compared across cities and currencies.

The formula

cash-on-cash return = annual cash flow ÷ total cash invested × 100

Annual cash flow is rent received minus letting and management fees, insurance, maintenance, service charges, ground rent and the full mortgage payment, interest and any capital repayment. Total cash invested is what you funded yourself: usually the deposit, purchase costs such as legal and lender fees, and any renovation paid before the property could be let. Money borrowed through the mortgage is excluded, because the point is the return on your own capital.

Invest 100,000 and receive 8,000 of cash flow in a year, and the return is 8%. Double both figures and the percentage stays the same.

Why this differs from cap rate

Cap rate divides net operating income by the property value and ignores financing, so it describes the property. Cash-on-cash return divides the cash flow left after the mortgage by the cash you put in, so it describes your position in the property.

Two investors buying identical properties earn the same cap rate, but one who uses a mortgage commits much less of their own money. When rent comfortably covers the loan, borrowing lifts cash-on-cash return above the cap rate. When finance is expensive or rents are thin, it can pull it below the cap rate or make it negative.

Getting the inputs right

Investors most often overstate cash flow: using gross rent, forgetting empty periods and underestimating maintenance. Allow for weeks without a tenant, set aside a maintenance reserve, and include management fees even if you manage the property yourself now. On the other side, cash invested is rarely just the deposit: purchase taxes, legal fees, mortgage arrangement fees, surveys and the cost of making the property lettable all count, and leaving them out makes the return look better than it is. With honest figures, you can rank several properties quickly and analyse in depth only those that meet your threshold.

What a good number looks like

In many mature rental markets, investors regard 6% to 10% as healthy for a leveraged buy-to-let. In a high-growth city, 3% or 4% of cash flow may be acceptable if price growth is expected to provide most of the return. In a flat market with little price growth, you need a higher cash return because cash flow is most of what you will earn. If a property returns 4% while a risk-free deposit pays nearly as much, the extra work, illiquidity and risk need justifying through growth or a plan to raise the cash flow.

Limits

The measure covers one year of cash flow and ignores capital growth, the equity built as the mortgage is paid down, and tax on income and gains. A property with a modest cash-on-cash return can still be a good long-term investment once those are counted. Rents rise, costs creep up and mortgage rates reset, so the return will drift over time. Use it alongside cap rate, total return and an assessment of risk.

About This Cash on Cash Return Calculator

Use this cash on cash return calculator to get an instant estimate based on the figures you enter. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.