Reference · Returns
Cash-on-cash return for real estate investors
What is cash-on-cash return?
Cash-on-cash return is the ratio of annual pre-tax cash flow from a property to the total cash equity you invested to acquire and stabilize it, expressed as a percentage. It answers how hard your out-of-pocket cash is working in a given year—not your total economic return (which can include principal paydown, tax effects, and appreciation). It is sensitive to loan terms, down payment, and one-time startup costs.
Investors often use cash-on-cash alongside cap rate and DSCR: cap rate summarizes unlevered yield on the asset; cash-on-cash summarizes levered yield on your cash.
How to calculate cash-on-cash return
Cash-on-cash = Annual pre-tax cash flow ÷ Total cash invested Example: Annual cash flow after debt service = $6,000 Cash invested (down payment + closing + rehab out-of-pocket) = $50,000 Cash-on-cash = 6,000 ÷ 50,000 = 12%
Align what you count as “cash invested” with your actual checks—include reserves you truly allocate to the deal if that is part of your model.
Cash-on-cash vs cap rate
Cap rate divides NOI by value without your loan. Cash-on-cash divides levered cash flow by your invested cash. A property can have a moderate cap rate but attractive cash-on-cash if leverage improves the cash yield—or the reverse if expenses or vacancy are high.
Try the calculator
Estimate with your own inputs—numbers are educational, not lender instructions.
Frequently asked questions
- Is cash-on-cash the same as ROI?
- People use “ROI” loosely. Cash-on-cash is one ROI measure focused on cash flow vs cash in. Total ROI can include appreciation, paydown, and taxes—different calculation.
- Should I include reserves in cash invested?
- Be consistent. Some investors include acquisition reserves; others track reserves separately. Document your definition when you compare deals.
- Where can I estimate cash flow and cash-on-cash?
- Veld’s public investment property calculator lets you test inputs quickly; a free account unlocks saving work in Analyze and portfolio tracking.