Cash-on-Cash Return Calculator
Annual cash flow against the cash you actually put in, plus the debt service coverage ratio lenders check.
Most lenders want a DSCR of 1.25 or better on an investment property. Below 1.00 the rent does not cover the loan at all.
Cash-on-cash return is annual pre-tax cash flow divided by the cash you actually invested: down payment plus closing costs plus any immediate work. Where cap rate describes the property, this describes your position in it, so the same building produces very different numbers depending on how much you borrowed.
Worked example. A $250,000 property with 25% down is a $187,500 loan. At 6.5% over 30 years that payment is $1,185 a month, or $14,221 a year. Against $15,940 of NOI the property throws off $1,718 of cash a year. With $70,500 invested ($62,500 down plus $8,000 costs), that is a 2.44% cash-on-cash return.
Frequently asked questions
What counts as cash invested?
Everything out of pocket to take ownership and get it rentable: down payment, closing costs, inspection, and immediate repairs. Excluding closing costs is a common way to flatter the return, and it is often 3 to 5% of the price.
Why is my cash-on-cash return lower than the cap rate?
Because debt costs more than the property yields. When the mortgage rate exceeds the cap rate, leverage works against you on cash flow, a situation called negative leverage. It can still make sense if you are buying for appreciation or loan paydown, but you should know that is the bet you are making.
What DSCR do lenders require?
Typically 1.20 to 1.25 for residential investment property, and some DSCR loan programs qualify the borrower on this ratio alone rather than personal income. Below 1.0 the property does not cover its own loan and you are funding the gap from elsewhere every month.
Does this include taxes or depreciation?
No, this is pre-tax cash flow. Depreciation often shelters much of a rental's taxable income, so after-tax returns can be meaningfully better than these figures for a given investor. That depends on your bracket and situation, which is a conversation for a tax professional.
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Calculators model hypothetical outcomes from the inputs you provide. They are informational only, not financial, investment, tax, or legal advice.