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

Cap rate measures return based on the full purchase price and excludes financing costs. Cash-on-cash return measures return based on actual cash invested (down payment + closing costs) and includes financing costs. Cash-on-cash is more relevant for leveraged investments.

Why is cash-on-cash return important?

Cash-on-cash return helps you evaluate leveraged investments and compare properties with different financing structures. It shows the actual return on your cash, allowing you to maximize returns by using leverage effectively.

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Purchase Price ($)

Down Payment (%)

Closing Costs (%)

Monthly Rent ($)

Monthly Expenses ($)

Includes mortgage, property taxes, insurance, maintenance, etc.

Understanding Cash-on-Cash Return

Cash-on-cash return is a critical metric that measures the annual return on the actual cash invested in a property. Unlike ROI, it focuses only on your cash investment.

Cash-on-Cash Return Formula

CoC Return = (Annual Cash Flow / Total Cash Invested) × 100

What is a Good Cash-on-Cash Return?

8-12%: Good return for stable markets with low risk
12-15%: Excellent return, typically in emerging markets
15%+: Outstanding return, may indicate higher risk

Frequently Asked Questions

What is cash-on-cash return?

Cash-on-cash return measures the annual return on actual cash invested. It's calculated as (Annual Cash Flow / Total Cash Invested) × 100.

What is a good cash-on-cash return?

A good cash-on-cash return typically ranges from 8% to 15% or higher, depending on your investment strategy and market conditions.