Cash-on-Cash Return is a metric used by real estate investors to show the rate of return of a given property, compared to the initial capital investment required to purchase it. This includes down payment, closing costs, and any rehab/repairs required. To calculate the cash-on-cash return, we use the following formula:

Cash-on-Cash Return = Annual Net Income / Initial Capital Investment

For example, if a property generates $10,000 per year (net) after all expenses, and the down payment, closing costs, and repairs to purchase the property totaled $50,000:

$10,000/$50,000 = 20% cash-on-cash return

CoC varies greatly from property-to-property, loan terms, and where properties are located geographically. But typically speaking, these are good numbers to shoot for:

Less than 8% (Poor/Minimum)

8% – 12% (Good/Average)

12% or higher (Excellent)