Cash-on-Cash Return Calculator

Most investors target a cash-on-cash return of 8% to 12% for residential rental properties. Returns below 6% may indicate the property is better suited for appreciation plays than cash flow. Returns above 12% often come with higher risk, higher vacancy, or deferred maintenance. Your target should reflect your financing costs and local market conditions.

Cap rate measures income return relative to the full property value, ignoring financing. Cash-on-cash return measures the return on your actual cash investment, after mortgage payments. A property with a 6% cap rate can have a much higher or lower cash-on-cash return depending on your loan terms and down payment percentage.

Total cash invested includes your down payment, closing costs (typically 2%–5% of purchase price), and any upfront repairs or renovations needed before the property was rented. Do not include the loan amount — only cash you personally paid out of pocket at the time of purchase or before tenanting.

California’s high property prices make strong cash-on-cash returns difficult to achieve. Many investors in Los Angeles, San Francisco, and San Diego accept returns of 2%–5%, relying on appreciation rather than cash flow. Inland Empire and Central Valley markets offer higher cash-on-cash returns, often 6%–9%, due to lower purchase prices relative to rent.

Texas markets generally offer stronger cash-on-cash returns than coastal states. Dallas, Houston, and San Antonio investors often achieve 7%–12% cash-on-cash returns on residential rentals. Texas has no state income tax, which improves after-tax cash flow. Higher property taxes in Texas (often 2%–2.5% of assessed value) reduce cash flow and should be factored in carefully.

New York City investors often see cash-on-cash returns of 2%–5% in prime Manhattan and Brooklyn locations. Upstate New York and outer borough markets can yield 6%–9%. New York State has some of the highest income tax rates in the country, which reduces after-tax returns. Rent stabilisation laws in NYC can also limit rent growth over time.

Florida has no state income tax, which improves cash-on-cash returns compared to states with high income tax. Tampa, Jacksonville, and Orlando investors typically see returns of 6%–10%. Miami and South Florida markets tend to be more expensive, with returns closer to 4%–7%. Short-term rental markets (vacation rentals) can produce higher gross returns but with more variable income.

No. Cash-on-cash return only measures annual cash income relative to your cash investment. It does not include property value appreciation, which can be a significant component of total return in growth markets. To measure total return including appreciation and loan paydown, calculate your equity multiple or internal rate of return (IRR) over the holding period.

Cash-on-cash return improves when you increase rental income, reduce operating expenses, or use higher leverage (larger loan relative to cash invested). Refinancing at a lower interest rate also reduces your mortgage payment and increases cash flow. Adding a second unit, converting to short-term rental, or reducing vacancy through better tenant screening all increase annual cash flow.

Cash-on-cash return is conventionally calculated before income tax. This makes it easier to compare properties across states with different tax rates. Your actual after-tax return will depend on your federal and state income tax brackets, the depreciation deduction available, and any passive activity loss rules that apply to your rental income.