Cash-on-cash return (CoC) is the ratio of a property's annual pre-tax cash flow to the total cash you invested. Unlike cap rate — which ignores financing — cash-on-cash return accounts for your mortgage payments, making it the most practical metric for leveraged investors evaluating real-world returns.
Cash-on-Cash Return Formula
Cash-on-Cash Return = (Annual Pre-Tax Cash Flow / Total Cash Invested) × 100
Annual pre-tax cash flow is the rent collected minus all operating expenses and mortgage payments (principal + interest). Total cash invested includes your down payment, closing costs, and any upfront repairs. For example, if you invested $80,000 and the property generates $6,400 per year after all expenses and debt service, your CoC return is 8%.
Use the Cash-on-Cash Return Calculator to run this calculation for any deal.
Cash-on-Cash Return vs Cap Rate
Cap rate measures a property's income yield independently of financing — it answers "how does this property perform?" CoC return measures your personal yield on the cash you deployed — it answers "how does this deal perform for me?" Two investors buying the same property with different down payments will have the same cap rate but very different cash-on-cash returns. Leverage amplifies CoC in both directions: more debt can boost CoC when rates are low, and crush it when borrowing costs are high.
Cash-on-Cash vs Total ROI
CoC return captures only the cash flow component of your return. Total ROI also includes principal paydown (your tenant pays down your mortgage), appreciation, and tax benefits. CoC is lower than total ROI in most appreciating markets, but it is the most reliable indicator of day-to-day financial sustainability — negative cash flow must be funded from other income, regardless of appreciation.
What Is a Good Cash-on-Cash Return?
Most experienced investors target a minimum of 6–8% CoC in stable markets, with higher thresholds (10–12%+) required in high-vacancy or high-management markets. In expensive coastal markets, 3–5% CoC is common and accepted by investors betting on appreciation. Compare your projected rental cash flow against your total cash invested to see if a deal clears your personal hurdle rate before making an offer.