How to Calculate Cash-on-Cash Return for Rental Property

Cash-on-cash return (CoC) is one of the most important metrics for rental property investors because it measures your actual cash yield on the money you invested — not the total property value. It's the metric that answers the question every investor actually cares about: what am I getting back on my dollars invested?

The Cash-on-Cash Formula

What Goes in the Numerator: Annual Cash Flow

Annual pre-tax cash flow = Gross Rental Income − Vacancy Allowance − Operating Expenses − Annual Mortgage Payments. Include all cash out: property management, taxes, insurance, maintenance, capex reserves, utilities, HOA. Do NOT include depreciation (non-cash), principal paydown (equity, not cash flow), or income taxes.

What Goes in the Denominator: Total Cash Invested

Total cash invested = Down payment + Closing costs + Rehab costs + Holding costs during renovation. This is ALL the cash you actually deployed to acquire and prepare the property.

Example Cash-on-Cash Calculation

Down payment: $60,000. Closing costs: $3,000. Rehab: $12,000. Total cash invested: $75,000. Annual gross rent: $22,800. Vacancy (5%): −$1,140. Operating expenses: −$7,980. Annual mortgage P&I: −$10,320. Annual cash flow: $3,360. CoC = $3,360 ÷ $75,000 = 4.5%.

What Is a Good Cash-on-Cash Return?

• 4–6%: Below average in most markets — acceptable only in high-appreciation areas
• 7–10%: Target range for most buy-and-hold investors
• 10–15%+: Strong cash-on-cash — typical in secondary markets with lower acquisition prices
• 20%+: Excellent returns, usually from BRRRR strategy or significant value-add

Dan White is a licensed Virginia real estate agent at Pearson Smith Realty and founder of FreeDealCalc.com. He has been investing in Northern Virginia real estate for 20+ years.