How it works
Cash-on-cash return divides one year of pre-tax cash flow by the total cash you invested. Unlike cap rate, it depends on your financing: change the loan and the result changes even though the property is identical.
Include every dollar you put in — down payment, closing costs, lender fees, and money spent to make the property rentable.
Formula
Down payment + Closing + Rehab + Other
Annual pre-tax cash flow ÷ Total cash invested × 100
Worked example
With the hypothetical defaults ($3,000 annual cash flow, $87,500 total cash):
| Cash-on-cash return | 3.43% |
|---|---|
| Total cash invested | $87,500 |
All figures in this example are hypothetical and chosen to illustrate the math. They are not current Houston market averages, quotes, or forecasts.
Frequently asked questions
Does cash-on-cash include principal paydown?
No. Principal paydown builds equity but is not cash you receive, so it is excluded.
Can cash-on-cash be negative?
Yes — when debt service exceeds NOI, annual cash flow is negative.
See how every assumption interacts
The 713 Deal Generator combines financing, income, operating costs, and upfront cash into a printable report with stress tests and the 713 Metrics Score.
Run the Full 713 Deal Generator713 Metrics provides educational and informational tools based on user-provided assumptions. Results are estimates and do not constitute financial, investment, tax, legal, lending, appraisal, brokerage, insurance, or real-estate advice. Verify property-specific information independently and consult appropriate licensed professionals.