Cash-on-Cash Return Calculator

Cash-on-cash return answers a practical question: for every dollar of your own money in the deal, how many dollars come back to you in a year? It divides annual pre-tax cash flow — net operating income minus debt service — by the total cash you invested, including down payment, closing costs, and up-front repairs.

How this differs from cap rate. Cap rate measures the property; cash-on-cash measures your position in it. Cap rate uses net operating income and property value and ignores financing entirely, so it is the same for every buyer at a given price. Cash-on-cash subtracts your loan payments and divides by your cash, so it changes the moment your down payment, rate, or amortization changes. A property with a 6 percent cap rate can produce a 9 percent cash-on-cash return with favorable financing — or a negative one with expensive debt.

Both figures are pre-tax and exclude depreciation, principal paydown as a return, and capital expenditures. The debt service coverage ratio shown above is a lender's view of the same inputs; many commercial lenders look for 1.20 or higher.