Cash-on-Cash Return
Measures the actual return on the cash you invest in a property.
Definition
Cash-on-cash return (CoC) measures the annual pre-tax cash flow relative to the total cash you invested. Unlike cap rate, it accounts for financing and tells you what return you're getting on your actual out-of-pocket investment.
Cash-on-Cash = Annual Cash Flow ÷ Total Cash Invested
Example: $6,000 annual cash flow ÷ $60,000 down payment = 10% CoC return
What's Included in "Cash Invested"
- Down payment
- Closing costs
- Immediate repairs or improvements
- Any other out-of-pocket costs at acquisition
What's a Good Cash-on-Cash Return?
- 8%+ — Generally considered good for long-term rentals
- 10-12% — Strong return for most markets
- 15%+ — Excellent, but verify the numbers carefully
CoC vs Cap Rate
Cap rate ignores financing and measures the property's return regardless of how you pay for it. Cash-on-cash shows your actual return based on how much of your own money you put in.