Formula
Cash-on-cash return = annual pre-tax cash flow ÷ total cash invested. Cash invested is everything out of your pocket: down payment, closing costs, upfront repairs and furnishing. Cash flow is rent minus all expenses and the mortgage payment.
Example
$75,000 invested and $350/month cash flow → $4,200/yr → 5.6% cash-on-cash.
What is a good cash-on-cash return?
Many buy-and-hold investors target 8–12%, but at higher interest rates 4–7% plus appreciation and loan paydown is common. Cash-on-cash ignores equity build-up and tax benefits, so look at total return too.
Need the cash flow number? Use the rental cash flow calculator.