Cash-on-Cash Return Calculator (Rental Property)
Run the numbers on a rental before you make an offer. Enter the purchase, the loan, the rent and the expenses, and the calculator produces the cash-on-cash return on the money you put in, the monthly cash flow, net operating income, cap rate, the debt service coverage ratio a lender will look at, and the quick 1% rule check.
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Read the how-to guide
How it works
- Gross scheduled rent = monthly rent × 12, plus other income. Vacancy and credit loss comes off as a percentage, leaving effective gross income.
- Operating expenses = property taxes + insurance + maintenance, management and the capital reserve (each a percentage of gross scheduled rent) + owner-paid utilities. NOI = effective gross income − operating expenses. Loan payments are not an operating expense.
- Debt service = 12 × the monthly principal-and-interest payment on the loan (price minus down payment, amortized over the term).
- Cash flow = NOI − debt service.
- Cash-on-cash return = cash flow ÷ total cash invested (down payment + closing costs + rehab). Cap rate = NOI ÷ purchase price, the return as if you paid cash. DSCR = NOI ÷ debt service; lenders commonly want 1.20 to 1.25 or more. The 1% rule compares monthly rent with 1% of the price as a first screen.
Including a capital reserve in operating expenses is the conservative choice and lowers NOI and cap rate a little compared with listings that leave it out. The return here is first-year cash return only: it does not count loan paydown, appreciation, rent growth or depreciation deductions.
Worked example
A $250,000 house with 25% down, 3% closing costs and $5,000 of make-ready takes $75,000 of cash. Rent of $2,200 is $26,400 a year; 5% vacancy leaves $25,080. Taxes of $3,000, insurance of $1,400, maintenance at 8% ($2,112) and a 5% reserve ($1,320) are $7,832 of expenses, so NOI is $17,248 and the cap rate 6.90%. The $187,500 loan at 7% over 30 years costs $1,247 a month, $14,969 a year, leaving $2,279 of cash flow, about $190 a month: a 3.0% cash-on-cash return, a DSCR of 1.15 and 0.88% on the 1% rule.
Frequently asked questions
What is a good cash-on-cash return?
There is no single answer; it depends on the market, the risk and what else you could do with the cash. Most investors want more than a savings account or bonds would pay, and they read cash-on-cash together with cap rate, DSCR and the condition of the building rather than on its own.
What is the difference between cap rate and cash-on-cash return?
Cap rate is NOI divided by the price and ignores financing, so it compares properties with each other. Cash-on-cash is cash flow after the loan payment divided by the cash you actually put in, so it describes your deal with your financing.
What is DSCR?
Debt service coverage ratio: NOI divided by the annual loan payments. A DSCR of 1.25 means the property earns 25% more than the payment. Investment lenders often require 1.20 to 1.25 or higher, and many DSCR loans price the rate on it.
Is the 1% rule still useful?
As a first screen. Monthly rent at or above 1% of the price usually means positive cash flow is possible; below it, run the full numbers before you assume anything. Many markets no longer pass it.
Why is maintenance a percentage of rent?
It is a planning convention, like the 50% rule for total expenses. Replace it with real quotes and the property's history when you have them, and keep a separate reserve for big-ticket items such as the roof and furnace.
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This calculator gives an estimate for planning and is not tax, legal or engineering advice. Confirm code-related results against the code edition adopted in your jurisdiction and with your authority having jurisdiction, and follow the manufacturer's instructions.