Investor tools
Cash-on-cash return calculator
Cash-on-cash return is the yearly pre-tax cash flow divided by the cash you put in. Unlike cap rate, it includes the mortgage.
Results
- Loan amount
- $637,500
- Annual mortgage payments
- $53,490
- Total cash invested
- $292,500
- Annual pre-tax cash flow
- $18,510
- Cash-on-cash return
- 6.33%
Estimates from your inputs only. Not financial, tax or lending advice.
The formula
Cash-on-cash return = annual pre-tax cash flow ÷ total cash invested.
| Item | What goes in |
|---|---|
| Total cash invested | Down payment + closing costs + furnishing and setup |
| Annual pre-tax cash flow | Net operating income − annual mortgage payments |
Why furnishing belongs in the cash invested
A vacation rental needs far more setup than a long-term rental: beds and linens for every room, a stocked kitchen, outdoor furniture, smart locks, photography. For a large group home this can be tens of thousands of dollars. Leaving it out flatters the return.
Cash-on-cash vs cap rate
- Cap rate ignores the loan and measures the property. Use the cap rate calculator.
- Cash-on-cash includes the loan and measures your cash. It rises with leverage when the cap rate is above the borrowing cost, and falls when it is below.
- Neither counts appreciation, loan paydown or tax effects. They are year-one cash measures.
Frequently asked questions
What is cash-on-cash return?
It is the annual pre-tax cash flow from a property divided by the total cash invested, including the down payment, closing costs and setup. It shows the yearly cash yield on the money you put in.
Is cash-on-cash return the same as ROI?
No. Cash-on-cash counts only one year of cash flow. A full return on investment would also include loan paydown, appreciation, tax effects and the eventual sale.
Should furnishing costs be included?
Yes, for a vacation rental. Furniture, linens and setup are cash you must spend before the first booking, so they belong in total cash invested.
Why can cash-on-cash return be negative?
When mortgage payments are larger than net operating income, cash flow is negative. This happens when the cap rate is well below the interest rate or occupancy is lower than planned.
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