Cash-on-cash return explained
The return on the cash you actually put in, after debt payments, and why it moves so much with financing.
Cash-on-cash return is annual pre-tax cash flow divided by the total cash invested. If you invest $250,000 (down payment, closing costs, and initial repairs) and the property produces $17,500 a year after all expenses and loan payments, your cash-on-cash return is 7%.
Why it swings with financing
Higher interest rates increase debt payments and shrink cash flow. A larger down payment reduces the loan but increases the cash invested. Run several scenarios instead of relying on one.
What to include in cash invested
- Down payment.
- Closing and lender costs.
- Immediate repairs and reserves you set aside.
Leaving out repairs and reserves is the fastest way to make a deal look better than it is.
Your next step
Apply this to your own situation in a few short questions, with guidance before you share any contact details.
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This content is educational and is not financial, investment, tax, or legal advice. Calculations are estimates based on your inputs and are not guarantees.