How to Calculate Cash-on-Cash Return for Property

Separate the return on cash invested from the property’s operating yield.

Use the Cash-on-Cash Return alongside this illustrative example.

A practical example

If you contribute 50,000 in total and retain 3,000 annual cash flow after operating costs and debt payments, cash-on-cash return is 6%. Omitting 5,000 of closing and repair costs would shrink the denominator to 45,000 and overstate the same result as 6.67%.

Check the result

List every initial cash payment before entering the investment total. Keep the annual cash-flow period consistent with the costs and mortgage figures used to calculate it.

Try a comparison

Keep annual cash flow at 3,000 and change total cash invested to 60,000. The return becomes 5%. This isolates the denominator; do not attribute the change to better or worse property operations when the operating cash flow has not changed.

What this does not establish

This ratio excludes taxes, sale proceeds and changes in property value. A positive ratio does not establish that the investment fits your risk or liquidity needs.

Report unclear guidance or a result that needs checking.