Cash-on-Cash Return Calculator
Cash-on-cash return is annual cash flow divided by the cash you actually invested in a property. It deliberately ignores appreciation and loan paydown, so it measures what the deal pays you now rather than what the building might be worth at some point in the future.
What the deal pays on your cash
Enter monthly figures. Every cost has to be in it or the number is fiction.
The figure is annual cash flow ÷ cash invested. It says nothing about what the property is worth, which is deliberate — appreciation is a separate and much less certain question.
Runs entirely in your browser. Nothing you type is sent anywhere or stored.
How the number is built
Cash-on-cash asks one question: of the money you actually handed over, how much comes back each year in cash?
Cash-on-cash = (rent − costs − mortgage) × 12 ÷ cash invested
The denominator is cash, not price. A 300,000 property bought with 60,000 down is a 60,000 investment for this purpose. What the property cost is irrelevant to the question being asked.
And appreciation is deliberately absent. That is the measure’s main virtue: it cannot be inflated by an optimistic assumption about future prices, because it contains no assumption about them at all.
A worked example
Take the defaults: 1,800 rent, 450 of costs, a 900 mortgage payment, 60,000 of cash in.
Monthly cash flow is 1,800 − 450 − 900 = 450.
Annual is 5,400.
Cash-on-cash is 5,400 ÷ 60,000 = 9.00%.
And the payback is 11.1 years — how long the deal takes to hand back the money you put into it, which is a figure most property calculators leave out and which reframes a 9% return as something that takes over a decade to become whole.
Why the costs line decides everything
The costs figure is where honest and dishonest calculations diverge. It should carry management, insurance, property tax, ongoing maintenance, and a monthly allowance for vacancy and for repairs that have not happened yet.
Drop the 450 to 200 by excluding vacancy and maintenance and the same property shows 14.00% instead of 9.00%. Nothing about the building changed. That gap is the entire difference between the returns quoted in property marketing and the ones people report afterwards.
A roof, a boiler and a rewire are not unlikely events over a twenty-year hold. They are scheduled events with unknown dates, and a monthly allowance is how they belong in the arithmetic.
The three figures worth running together
Cash-on-cash on its own can be made to say almost anything, so it belongs beside two others.
The first is the payback period, which this calculator reports. 9% sounds strong until it is restated as 11.1 years to get your money back — the same fact, and the second phrasing is the one that prompts a serious look at the assumptions.
The second is the same figure without borrowing. Paying cash for the default property means no 900 payment, so the annual cash flow rises to 16,200 — but the cash invested rises too, and on a 300,000 purchase that is 5.40%. The leveraged deal shows 9% and the unleveraged one 5.4%, and the unleveraged one survives a year of vacancy. The measure prefers the fragile deal.
The third is what the same money returns elsewhere. A property at 9% cash-on-cash with active management, illiquidity and repair risk is being compared against alternatives that need none of those — and the comparison is the decision, not the figure on its own.
What borrowing does to it
Leverage raises this figure and it raises the fragility with it. Paying cash for the same property gives a lower cash-on-cash return and a deal that survives a vacancy; borrowing 80% raises the return and means a few empty months are a personal cash-flow problem.
The measure cannot see that difference, which is its main limitation. Two deals showing 9% can have completely different survival characteristics.
And it is a snapshot of year one. Rents rise, costs rise, and a fixed mortgage payment does not — so the figure usually improves over time in ways this calculation does not project.
The original data
Of the 24,971 unique videos in the search study behind this site, the BRRRR strategy appears in 5 at a median of 242,150 views, house hacking in 1 at 60,233, and real estate more broadly in 171 at 27,987.
Five videos on BRRRR at a 242,150 median. Cash-on-cash return is the measure BRRRR is evaluated with, and the strategy is only as good as the arithmetic underneath it.
The question: It shows nine percent before repairs. Buy it?
The answer is that a figure “before repairs” is not a cash-on-cash return. Repairs and vacancy are operating costs, not exceptions to them — and a calculation that excludes them is measuring a property that does not age and is never empty. Put them in, then decide.
When it fails
This measure assumes you keep the property, and says nothing about the cost of not keeping it. A round trip in a traded security costs the spread and any commission, and even that is considered a meaningful drag on a trading strategy; the round trip on a property — agent fees, legal costs, taxes on the transaction — is an entirely different order of magnitude, and it is invisible in a cash-on-cash figure. A deal returning 9% a year that has to be sold in year two has probably lost money.
The second failure is a single large repair. At 5,400 of annual cash flow, one 6,000 roof is more than a year of the entire return.
A third is excluding vacancy. It moves the headline figure by several percentage points and it is the most commonly omitted line.
A fourth is comparing a leveraged deal to an unleveraged one on this number alone. The higher figure is also the more fragile one.
A fifth is treating it as a total return. It excludes appreciation and loan paydown by design, so it understates a long hold as surely as it flatters a leveraged one.
And a sixth is using year-one figures for a ten-year decision. Rents and costs both move, and the mortgage payment usually does not.
Related
Rental property covers what ownership actually involves and the costs a listing does not show. Real estate is the wider asset class and how it differs structurally from securities. And mortgage is the financing that makes this figure larger and the deal more fragile at the same time.
The line item that separates a real calculation from an optimistic one is vacancy. Nobody puts it in, because at the moment of buying there is a tenant lined up and it feels like a hypothetical. It is not a hypothetical over ten years — and a property that only works at 100% occupancy does not work.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.