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CASH-ON-CASH CALCULATOR

Cash-on-Cash Return Calculator

Calculate the pre-tax cash yield on a Texas rental property — annual cash flow divided by total cash invested. Color-coded against conventional SFR-rental tier thresholds.

Property economics

Texas avg ~2.0% of purchase

Investment policies run higher

% of gross rent (typ. 8% for SFR)

% of gross rent (typ. 5%)

% of gross rent (typ. 5–10%)

Capital + financing

$80,000 of $320,000

Typically ~3% of purchase

Separate from ongoing maintenance reserve

Investment-property rates run higher than primary

Cash-on-cash return
-6.1%
Weak cash-on-cash — re-underwrite or pass

CoC below 4%. The deal earns less on cash than a treasury yield. Either the price is too high, the rent is too low, or the financing is wrong. Adjust inputs to find the structural problem.

Annual cash flow
-$5,421

Negative — rent does not cover expenses + P&I after reserves.

Capital invested
Down payment
$80,000
Closing costs
$9,600
Initial repairs
—
Total cash invested
$89,600
Monthly economics
Effective rent (after vacancy)
$2,280.00
Tax + insurance + HOA
$741.67
Property management
$192.00
Maintenance reserve
$120.00
Total operating expenses
$1,053.67
Monthly P&I
$1,678.11
Monthly cash flow
-$451.78
Loan summary
Loan amount
$240,000
LTV at origination
75.0%

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Estimate only. Cash-on-cash is a pre-tax screen — it ignores appreciation, principal paydown, and tax benefits (depreciation, interest deduction). Vacancy and maintenance are reserves, not actual spend; in any given month one or both may be zero. For a lender-comparable ratio, run the DSCR Calculator instead.
How to read this number

Cash-on-cash — the rental investor’s first screen.

Cash-on-cash return — CoC for short — is the simplest yield metric in rental-property investing. The formula is annual pre-tax cash flow ÷ total cash invested. It tells one question: of the cash you put down to acquire and stabilize the property, what percentage comes back to you in the first year as cash in pocket?

What is cash-on-cash return?

Cash flow is gross rent minus every recurring monthly cost — taxes, insurance, HOA, property management, vacancy reserve, maintenance reserve, and the principal-and-interest payment on the loan. Multiply by 12 to get the annual number. Cash invested is the down payment plus closing costs plus any initial make-ready repairs you fronted before placing a tenant. Divide annual cash flow by cash invested, multiply by 100, and you have CoC. It is intentionally pre-tax and intentionally excludes appreciation and principal paydown — those belong in a separate total-return calculation.

Why CoC matters for rental investors

CoC is the deal’s opportunity-cost test. A 6% CoC at a time when high-yield savings pays 5% means the deal is generating a 1-point premium for materially more risk and illiquidity — that is a hard sell. A 10%+ CoC means the income stream alone justifies the position before any appreciation or tax benefit. Most disciplined Texas rental-portfolio investors target 8% CoC minimum at acquisition; experienced operators in tougher markets accept 5–7% if the property is priced well below replacement cost or the rent has clear upside.

Typical Texas CoC ranges by market

DFW core suburbs (Plano, Frisco, McKinney, Allen) typically pencil 3–6% CoC at current rates and prices — the appreciation thesis carries those deals more than the income thesis. DFW value submarkets (Garland, Mesquite, Grand Prairie, parts of Arlington and Fort Worth) routinely hit 6–9% CoC with disciplined acquisition. Houston inside-Loop and EaDo land in similar territory. San Antonio inside-410 and parts of South San Antonio frequently hit 8–12% CoC on well-bought distressed product. Austin core has compressed to 2–5% as price growth outpaced rent growth; Austin investors generally accept lower CoC for the appreciation trade.

CoC vs DSCR vs Cap Rate

DSCR (debt-service coverage ratio) is the lender’s metric: gross rent ÷ PITIA, no operating expenses included. It tells you whether the loan closes. Cap rate is the property’s metric: net operating income ÷ purchase price, ignoring leverage entirely. It tells you what the property earns unlevered — useful for comparing apartments to retail to industrial. CoC is the investor’s metric: it includes leverage and operating expenses both, so it tells you what your cash earns. The three measure different things on purpose; underwrite a rental with all three and you have a complete picture — DSCR for the lender, cap rate for the asset, CoC for your wallet.

Tier reference

CoC tier thresholds

≥ 8%
Strong
4% – 8%
OK
< 4%
Weak

Conventional Texas SFR thresholds. High-appreciation markets tolerate lower CoC; flat-appreciation markets demand higher.

FAQ

Common cash-on-cash questions.

Underwriting a rental? Call us at (903) 402-5626 — we structure investor files weekly across DFW and beyond.

How is cash-on-cash different from DSCR?
DSCR measures the property: gross rent divided by PITIA, with no operating expenses included. It is the lender’s underwriting ratio. Cash-on-cash measures the investor: annual pre-tax cash flow (after every expense and reserve) divided by total cash invested. DSCR tells you whether the loan will close. Cash-on-cash tells you whether the deal is worth doing. A property can have a strong DSCR (1.20+) and still be a weak CoC deal if the down payment, closing, and reserves are too large relative to cash flow.
What counts as a "good" cash-on-cash return?
Conventional Texas SFR-rental thresholds: 8%+ is strong (clears the bar for most active investors), 4–8% is OK but tight, and below 4% is weak. The bar moves with rates — when treasury yields are 5%+, an 8% CoC pre-tax is barely a risk premium. In high-appreciation markets, investors accept lower CoC because total return (CoC + appreciation + principal paydown) carries the deal. In flat-appreciation markets, CoC has to do the heavy lifting, so 10%+ is the more honest target.
Should I include appreciation in this number?
No — cash-on-cash is deliberately a cash-only screen. Appreciation is a separate component of total return that does not show up until you sell or refinance. Including it would inflate the number with paper gains that may or may not materialize. The clean way to think about returns: CoC is the income engine, appreciation is the equity engine, principal paydown is the forced-savings engine. Total return is the sum, but you underwrite the income engine first because it is the only one with monthly checks.
What about tax benefits?
CoC is pre-tax. After-tax returns on rental property are typically meaningfully higher than CoC for most investors because depreciation (typically 27.5-year straight-line on residential) creates a paper loss that offsets the cash-flow income on your tax return — sometimes wiping it out entirely. Mortgage interest is also deductible. The exact after-tax bump depends on your bracket, whether you qualify as a real-estate professional, and whether passive-activity loss rules apply. Run the after-tax math with your CPA on any deal where pre-tax CoC is borderline.
How does CoC change with leverage?
More leverage usually lifts CoC because the denominator (cash invested) shrinks faster than the numerator (cash flow) does. A 25%-down deal at 7.5% might pencil 6% CoC; the same deal with 35% down at the same rate often produces lower CoC because you locked up more cash without proportional cash-flow improvement. The trade-off: higher leverage is also higher risk — debt service eats more of the rent, so a small dip in occupancy or a rent reset can push you into negative territory. The discipline is to find the leverage point where CoC and DSCR both clear the bar; that is usually 25–30% down for SFR rentals at current rates.

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