Cash-on-cash measures the annual pre-tax cash flow against the actual cash you put in — the return on your money, accounting for leverage. Annual cash flow divided by total cash invested.
The example
$7,200 cash flow on $90k invested.
| A | B | |
|---|---|---|
| 1 | Item | Value |
| 2 | Annual cash flow | 7200 |
| 3 | Cash invested | 90000 → 8.0% |
The formula
The formula:
How it works
How it works:
- Annual cash flow is NOI minus debt service (the actual cash left after the mortgage).
- Cash invested is your real out-of-pocket: down payment + closing costs + rehab.
- Divide and format as a percentage — the return on the cash you actually deployed.
- Unlike cap rate, cash-on-cash reflects leverage: financing changes both the cash flow and the cash in.
Why it differs from cap rate: cap rate ignores the loan; cash-on-cash includes it. A property with a 6% cap rate can post a 10%+ cash-on-cash return when a mortgage amplifies the return on a smaller cash stake — the essence of leverage (which cuts both ways).
Try it: interactive demo
Annual cash flow and cash invested.
Variations
Annual cash flow
NOI less debt:
Total cash invested
Out of pocket:
Monthly to annual
From monthly flow:
Pitfalls & errors
After the mortgage. Use cash flow net of debt service, not NOI.
All-in cash. Include closing and rehab, not just the down payment.
Pre-tax. Cash-on-cash is before income tax and excludes appreciation.
Practice workbook
Frequently asked questions
How do I calculate cash-on-cash return in Excel?
How is cash-on-cash different from cap rate?
What counts as cash invested?
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