Cash-on-Cash Return: What Your Invested Dollars Earn Each Year

Cash-on-cash return is one year of pre-tax cash flow divided by the total cash you put into a deal. It answers one question: what is my money earning this year?

Cash-on-cash = annual cash flow ÷ total cash invested

Cash flow is rent minus operating expenses and loan payments. Cash invested covers the down payment, closing costs, upfront repairs and any reserves you funded.

A simple example

Example, round numbers. You buy a rental for $300,000. You put down $75,000, pay $10,000 in closing costs and spend $15,000 on repairs. Total cash in: $100,000.

Rent is $33,000 a year. Expenses are $10,000 and loan payments are $17,000. Cash flow: $6,000.

$6,000 ÷ $100,000 = 6% cash-on-cash.

Why it matters

It shows the effect of leverage. Borrowing more usually means less cash in, which can raise the percentage, as long as the rent still covers the bigger payment. It also lets you compare deals with different prices and loan structures side by side.

Where it misleads

It leaves out appreciation, loan paydown and tax effects. It is also easy to inflate by skipping closing costs or vacancy.

Why it matters to you

Use real rents and full costs. Then pair cash-on-cash with other measures, such as equity multiple and the debt service coverage ratio (DSCR), before you commit.

RSC Private Lending's DSCR Rental loans go up to 80% LTV on a purchase and qualify on the property's cash flow, with no personal income documents. Send us your scenario for a term sheet in 24 hours. Subject to underwriting.