Cash on Cash Return Calculator
Estimate annual pretax rental cash flow as a percentage of entered down payment and closing costs, with vacancy and mortgage payments included.
How it works
Enter the down payment and closing costs, then add annual rent, vacancy percentage, annual operating expenses, and the monthly mortgage payment. Use one currency and consistent annual or monthly periods as labeled.
Vacancy loss is annual rent multiplied by the vacancy percentage. Effective gross income is annual rent less that loss. Annual pretax cash flow subtracts operating expenses and twelve monthly mortgage payments from effective gross income.
Total cash invested in this calculator is the down payment plus closing costs. Cash on cash return is annual pretax cash flow divided by that total, multiplied by 100. Monthly cash flow is annual pretax cash flow divided by 12.
The mortgage payment includes principal and interest. Keep property tax or insurance escrow out of that field when those costs are already included in operating expenses. Negative cash flow is allowed. A zero cash denominator leaves the return percentage unavailable.
Step by step
- Enter the two cash contribution amounts and the annual rent.
- Add vacancy, annual operating expenses, and monthly mortgage payment.
- Review the annual and monthly cash flow and the return on entered cash.
Worked example
Enter a down payment of 50,000, closing costs of 5,000, annual rent of 36,000, vacancy of 5%, annual operating expenses of 8,000, and a monthly mortgage payment of 1,200.
Vacancy reduces rent by 1,800, leaving effective gross income of 34,200. After operating expenses and 14,400 in annual mortgage payments, pretax cash flow is 11,800. Entered cash is 55,000, so the cash on cash return is about 21.45%. Average monthly cash flow is about 983.33.
When to use this calculator
Use this calculator to estimate how entered annual rental cash flow compares with the down payment and closing costs entered for a scenario.
Check the currency and periods for each input. Use a separate method for property value, after tax results, equity growth, or total return.
Common interpretation errors
Do not enter property tax or insurance escrow twice. If those amounts are included in annual operating expenses, exclude them from the monthly mortgage payment field.
Do not treat this percentage as a total return. It excludes principal paydown, appreciation, sale proceeds, taxes, and costs that were not entered.
Cash on cash return formula
Total entered cash = down payment + closing costs
Vacancy loss = annual rent × vacancy percentage / 100
Effective gross income = annual rent − vacancy loss
Annual pretax cash flow = effective gross income − annual operating expenses − (monthly mortgage payment × 12)
Cash on cash return (%) = annual pretax cash flow / total entered cash × 100
Average monthly cash flow = annual pretax cash flow / 12
Money amounts must be finite and nonnegative. Vacancy percentage must be from 0 through 100. A return percentage requires positive entered cash. Results outside the supported numeric range are not shown.
Assumptions and limits
The denominator includes only the down payment and closing costs entered. Initial repairs, reserves, and other acquisition costs are not added automatically, so assess them separately when reviewing total cash needs. Cash flow subtracts the entered monthly principal and interest payments. The return does not add equity gained through principal repayment, property appreciation, sale proceeds, or capital gains. Annual cash flow is pretax and uses entered vacancy, expenses, and monthly principal and interest payments. Property tax or insurance may be included in operating expenses; exclude the same escrow amounts from the mortgage field to avoid counting them twice. Income tax is not modeled. The result is a calculation of the entered scenario, not a forecast, property valuation, or investment recommendation.
Key terms
- Annual pretax cash flow
- Annual rent after vacancy, less annual operating expenses and twelve monthly mortgage payments. The result is pretax cash flow.
- Entered cash
- Down payment plus closing costs. These are the only amounts in this calculator’s cash denominator.
- Cash on cash return
- Annual pretax cash flow divided by entered cash, multiplied by 100. It is undefined when entered cash is zero.
Related tools
The Cap Rate Evaluator uses net operating income and property value before financing. This calculator subtracts the entered mortgage payments and compares the remaining annual cash flow with the two cash amounts entered here.
Use the two results to examine different parts of a scenario. They do not include the same denominator or answer the same question.
FAQ
What inputs does the calculator use?
Enter down payment, closing costs, annual rent, vacancy percentage, annual operating expenses, and monthly mortgage payment. Money inputs should use the same currency and period assumptions.
How is cash on cash return calculated?
The calculator reduces annual rent by the vacancy percentage, subtracts annual operating expenses and twelve monthly mortgage payments, then divides the remaining pretax cash flow by down payment plus closing costs. It multiplies that ratio by 100.
What does the mortgage payment include?
Enter the monthly principal and interest payment. If property tax or insurance is included in annual operating expenses, leave escrow amounts out of this mortgage field so they are not counted twice.
What is included in total cash invested?
The calculator counts only the down payment and closing costs entered in those fields. Initial repairs, reserves, and other acquisition costs are not added automatically. Review those amounts separately when assessing the full cash requirement.
Can the cash on cash return be negative?
Yes. If vacancy adjusted rent is less than operating expenses plus mortgage payments, the calculator shows negative pretax cash flow and a negative return. That is the result of the entered assumptions.
Related tools
The Cap Rate Evaluator compares net operating income with property value before financing. This calculator instead subtracts entered mortgage payments from cash flow and divides by down payment plus closing costs. The two measures use different denominators.