Cash-on-cash return calculator.
Cap rate ignores your loan; cash-on-cash doesn’t. This measures the annual pre-tax cash flow you earn on the real cash you put into a deal — down payment, closing, and upfront capital.
How cash-on-cash return works
Cash-on-cash return answers a question a cap rate can’t: what am I earning on the actual cash I put in? It divides your annual pre-tax cash flow — NOI minus debt service — by your total equity, including down payment, closing costs, and any upfront capital. Because it isolates the levered return on your own money, it is the number most buyers watch in year one.
Example. You buy a property producing $150,000 of NOI with a loan that costs $95,000 a year in debt service, leaving $55,000 of cash flow. If you invested $650,000 of cash to close, your cash-on-cash return is about 8.5%. Lower your down payment and the percentage often rises — as long as the cap rate stays above your loan rate.
Frequently asked questions
Want this checked against real comps?
Cash-on-cash is only as honest as the operating assumptions under it. Send me the deal and I'll rebuild it from comparable buildings.
Estimates are for planning only and use simplified assumptions — not tax, legal, or investment advice. Verify with your lender, CPA, and a full broker analysis before acting.
An annual snapshot, not a return
Cash-on-cash divides the cash you receive in a year by the cash you put in. It is useful because it is simple and it reflects leverage, and limited because it ignores everything that happens outside that year.
It says nothing about principal paydown, nothing about appreciation, and nothing about the sale that eventually determines whether the investment worked. A deal can show an attractive cash-on-cash in year one and a poor total return, or vice versa.
The assumptions that make it wrong
The same three that distort every operating statement: vacancy assumed at zero on a fully leased building, no management fee where the owner self-manages, and no reserve for the roof or the mechanical plant. Insert all three and a comfortable-looking return frequently becomes a thin one.
The Florida-specific one is insurance. It has moved sharply enough in recent years that using last year's premium rather than the current renewal will overstate the return by a meaningful margin on a small building. Ask for the actual current-year figure.
Common questions
What is a good cash-on-cash return?
It depends on asset type, leverage and market conditions, and it should always be read against a normalised operating statement rather than a seller's pro forma. A high figure built on zero vacancy and no reserves is not a high figure.
Does cash-on-cash include principal paydown?
No. It measures cash received against cash invested in a single year, so it excludes principal reduction, appreciation and the eventual sale. Use IRR or equity multiple for total return.
What is usually missing from the calculation?
A vacancy factor, a market management fee, a capital reserve and a current-year insurance figure. In South Florida the insurance line in particular has moved enough that a stale number materially overstates the return.
Tools: deal analyzer · DSCR · IRR · all calculators · Justin Crow, South Florida commercial broker