Cash-on-Cash Return Calculator
6.00%
Formula: Cash Flow / Cash Invested
Formula: CoC Return = (Annual Pre-Tax Cash Flow ÷ Total Cash Invested) × 100
- Base Return: 6.00%
- If Cash Flow changes: -10% → 5.40% | +10% → 6.60%
- If Investment changes: -10% → 6.67% | +10% → 5.45%
💵 Evaluating Your Return
Your 6.00% CoC return is below typical investor targets.
- 5-7%: Conservative return, lower leverage or stable properties.
- 8-12%: Target range for most commercial real estate investors.
- 12-15%: Strong return, may indicate good deal or higher leverage.
- 15%+: Excellent return, verify assumptions aren't overly optimistic.
💡 Pro Tip: CoC return changes with leverage (the size of your loan), while cap rate stays the same. Use both metrics together: CoC shows your actual cash return on your down payment, while cap rate shows the property's raw performance before financing.
Understanding Cash-on-Cash Return
Want a deeper dive? Read our Complete Guide to Cash-on-Cash Return.
Cash-on-Cash (CoC) Return is a rate of return ratio that calculates the total cash income earned on the total cash invested in a property. It is a key metric for real estate investors because it measures the performance of an investment based on the actual cash they have put into the deal, providing a clear picture of their annual return before taxes.
How It Differs from Cap Rate
While cap rate measures a property's unlevered yield (as if it were purchased with all cash), Cash-on-Cash Return is a levered metric. This means it takes into account the effect of financing on the return. Because it includes debt service in its calculation (Annual Cash Flow = NOI - Debt Service), the CoC return is highly sensitive to loan terms like interest rate and amortization period.
Frequently Asked Questions
Cap rate measures a property's unlevered return (as if bought with all cash), ignoring financing. Cash-on-cash (CoC) return measures the return on the actual cash invested, accounting for loan payments. CoC is a more personal metric reflecting your specific deal structure, while cap rate is better for comparing properties on an equal footing.
Most commercial real estate investors target a CoC return of 8-12%. Returns below this range may not justify the risk, while returns above it are considered very strong. However, the 'right' number depends heavily on the market, property type, and your personal investment strategy.
Yes. A negative CoC return means you are losing money on the property each year after paying all expenses and debt service. This can happen in the early years of a value-add project or if expenses are higher than anticipated. It indicates you must contribute more cash to keep the property running.