How is cash-on-cash different from cap rate?

Cap rate is unleveraged (NOI ÷ price). Cash-on-cash factors in your financing: it's annual pre-tax cash flow after the mortgage, divided by the actual cash you put in (down payment, closing costs, rehab). With leverage, the two can differ a lot.

What is a good cash-on-cash return?

It varies by strategy and market; many long-term-rental investors target high single digits to low double digits. It's most useful compared against your other uses of the same cash.

What is cash-on-cash return? Formula

What is cash-on-cash return?

Definition

Cash-on-cash return is your annual pre-tax cash flow (NOI minus mortgage payments) divided by the total cash you invested — down payment, closing costs and any rehab. Unlike cap rate, it reflects your financing and the actual money you put in.

Formula

Cash-on-cash = Annual pre-tax cash flow ÷ Total cash invested × 100

Example

Worked example

Annual cash flow after mortgage of $6,000, total cash invested of $90,000 → 6,000 ÷ 90,000 = 6.7%. (Example figures.)

How ReSharpe calculates this

ReSharpe computes cash-on-cash on your real financing — down payment, rate, amortization and closing costs — using NOI built from the listing's actual taxes, HOA and calibrated rent. Change any assumption and it recomputes instantly. See instant deal analysis.

Related: Cap rate · NOI · DSCR

Frequently asked questions

How is cash-on-cash different from cap rate?: Cap rate is unleveraged (NOI ÷ price). Cash-on-cash factors in your financing: it's annual pre-tax cash flow after the mortgage, divided by the actual cash you put in (down payment, closing costs, rehab). With leverage, the two can differ a lot.
What is a good cash-on-cash return?: It varies by strategy and market; many long-term-rental investors target high single digits to low double digits. It's most useful compared against your other uses of the same cash.

See these numbers computed on a real South Florida listing.

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ReSharpe is an analytics tool for licensed real estate professionals. This page is general information — not financial, investment, legal or tax advice. Verify figures and consult licensed professionals before acting.