What Is Cash-on-Cash Return and Why It Matters
2026-03-10
Cash-on-cash (CoC) return measures the annual pre-tax cash flow relative to the total cash you invested. It answers the question every investor asks: "What return am I getting on my actual dollars?"
The Formula
CoC Return = Annual Cash Flow / Total Cash Invested x 100
Total cash invested includes your down payment, closing costs, and any upfront rehab. Annual cash flow is your rental income minus all expenses and debt service.
What's a Good CoC Return?
Most investors target a minimum of 8-12% cash-on-cash return. Here's a rough guide:
- Below 4% — You'd earn more in a high-yield savings account. Pass.
- 4-8% — Acceptable if the property has strong appreciation potential.
- 8-12% — Solid deal. This is the sweet spot for most buy-and-hold investors.
- 12%+ — Excellent. These deals are competitive — move fast.
Why CoC Beats Cap Rate for Investors
Cap rate ignores financing entirely. CoC return accounts for your actual loan terms — down payment, interest rate, and amortization. Two properties with the same cap rate can have wildly different CoC returns depending on how you finance them.
Common Mistakes
- 1.Forgetting vacancy — Always factor in 5-8% vacancy, even in hot markets.
- 2.Ignoring CapEx — Roofs, HVAC, and water heaters fail. Budget 5-10% of rent.
- 3.Using list rent, not market rent — Verify with comparable listings or tools like Rentcast.
Use Caprium to calculate CoC return instantly for any property.