Cash-on-Cash Return: What It Is and How to Calculate It

Cash-on-cash return answers one question: what percentage return am I getting on the actual cash I invested? Unlike cap rate which uses the full property price, cash-on-cash focuses on YOUR money.

The Formula

Cash-on-Cash = Annual Pre-Tax Cash Flow / Total Cash Invested x 100

Real-World Example

Buy a property for $400,000 CAD (~$295,000 USD). Down payment: $80,000. Annual rent: $28,800. Annual expenses (including mortgage): $24,000. Cash flow: $4,800/year. Cash-on-cash: $4,800 / $80,000 = 6%. That means your $80,000 earns 6% per year in cash flow alone - before appreciation.

The Bottom Line

A good cash-on-cash return depends on your market and risk tolerance. 5-8% is common for stable markets. 10%+ is excellent but often comes with higher risk. Anything below 4% means your money might work harder elsewhere.