How to calculate cash-on-cash return
Cash-on-cash = annual before-tax cash flow ÷ initial cash invested × 100
Initial cash investment includes the down payment, closing costs and upfront repairs. Annual cash flow should reflect operating costs, vacancy, replacement reserves and all scheduled debt payments.
If a property returns $6,000 a year after those costs and requires $80,000 up front, its cash-on-cash return is 7.5%. A negative annual cash flow produces a negative return.
Cash-on-cash is not total ROI
This metric excludes property appreciation, loan principal reduction as an equity benefit, future sale costs and tax effects. Those can matter to total return but do not create spendable monthly cash today.
Why does financing change the answer?
A smaller down payment lowers initial cash invested but usually increases debt payments. Use the full rental calculator to test both effects together. A return is undefined when no cash is invested.