Real Estate Investing

Cash on Cash Return In Real Estate: Formula & Definition

Tirios Team

February 3, 2023
cash return

Table of Contents

I. Introduction to Cash on Cash Return

II. Definition and Calculation of Cash on Cash Return

III. What is a good Cash on Cash Return?

IV. Cash on Cash vs ROI

V. Cash on Cash vs IRR

VI. Ideal Cash on Cash for Rental Properties

VII. Conclusion

It is often said that, "Real estate investing remains a true means of building an individual's cash flow and wealth." Every metric has its place, but no metric gives the whole story, like the Cash on Cash Return(CoC). The Cash on Cash Return metric has always been popular as a quick read on an income property because it allows easy comparison to other investments. 

The Cash on Cash Return metric across different properties helps investors understand how each will impact their overall portfolios. Also, investors can get a consistent look at the long-term potential of multiple assets. Understand what the metric tells you so that you can be better prepared to make a wise investment decision with the correct information.

Let's dig a little deeper to understand Cash on Cash Return.

What is cash on cash return?

So, what is cash on cash return? Cash on Cash Return (CoC) is one of the key metrics that help show the property's potential return in an easily comparable number. The higher the cash-on-cash return, the better the real estate investment will be for the investor. 

Cash on cash return meaning is the measure of the annual return the investor made on the property about the amount of mortgage paid during the same year. This method is easy to understand and one of the most critical real estate ROI calculations. Let us understand with the help of a cash on cash return example.

For instance, you buy a rental property for $100,000 and can pay that amount upfront in cash. If you rent it out for $3,000 a month and the monthly upkeep costs $1,000, then your annual pre-tax cash flow is $24,000: ($3,000 - $1,000) x 12 months. If you divide by the amount of cash invested ($100,000), your cash-on-cash return is 24,000/100,000, or 24%.

What is good cash on cash return?

So, now you must think of what is a good cash on cash return. Good cash-on-cash return depends on the investor, the local market, and also expectations of future value appreciation.

For some investors, an 8-10% cash on cash return is sufficient if the property meets their investment objectives. Others might look at deals with a minimum of 20% cash on cash return. 

The local market influences cash on cash returns. In scorching markets, higher acquisition costs require substantially more equity. If income is comparably high, the total cash on cash return might be higher.

Many investors are willing to accept lower cash-on-cash returns in primary markets with underlying solid economics, mainly if they are risk-averse or have a long investment horizon.

How do you calculate cash-on-cash ROI?

ROI is used to evaluate the overall rate of return on the property, while Cash on Cash evaluates the return on the actual cash invested. How do I calculate the cash on cash return? The cash on cash return formula divides the Annual Net Cash Flow with the Invested equity to get the Cash on Cash Return. 

Is cash on cash return the same as ROI?

The Cash on Cash Return and the Return on Investment are used interchangeably, but they are different. The points of differentiation of cash on cash return vs. ROI are the CRR looks at returns relative to any cash out-of-pocket, and the ROI looks at the overall returns on the total investment. ROI measures the returns based on the eventual sale price of a property. 

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How to calculate cash on cash return in excel?

You can calculate an investment property's Cash on Cash Return in an excel spreadsheet file. You have to download the file, input your numbers and calculate results in no time. It is ideal to have a template in Excel where only the values need to be modified.

You can find many excel templates on the internet, download the cash on cash return excel template safely and enter your name and email address.

Following are the steps on how to calculate cash on cash return in excel template:

Step 1: Open the template

Step 2: Modify the values according to what you have in mind for each property. 

What is the difference between ROI and cash flow?

Cash flow is more important than ROI as cash flow is a function of rent and expenses, whereas Return On Investment (ROI) is a function of net income and price. For the average landlord, ensure there is adequate cash flow to enjoy the appreciation when it comes and calculate a significant ROI.

What is the difference between cash on cash return and IRR?

The point of differentiation between cash on cash return vs. IRR is an Internal Rate of Return(IRR) that evaluates an investment's potential profitability according to all net cash flows received during the investment period. The formula for calculating IRR requires using a financial calculator, Excel, or a specialized calculator through a Google search.

On the other hand, cash-on-cash return focuses solely on the initial investment's profitability. Cash on cash return does not consider the entire ownership period of the investment. You can also use the cash on cash return calculator to help determine the cash returns in commercial real estate financing.

What is good cash on cash return for rental property?

There are no specific rules for good cash on cash returns. It is a good investment in a growing market with a lower return. So, what is a good cash-on-cash return for rental property?

The answer is that a projected cash return of 8 to 12 percent is a worthwhile investment for some investors depending on the risk profile. On the other hand, for risk averse investors, even 5 to 7 percent is acceptable.


Cash on Cash Return is an accurate metric for understanding how much cash flow the property could generate during the operation period. For investors, it is an important consideration. 

Real estate investors look for metrics when analyzing properties and pitching potential partners. Beginner investors could expect a lower Cash on Cash Return and increase their standards as they gain knowledge and know exactly what they are looking for in a rental property.


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