Cash-on-cash calculator
Year-one cash flow after debt service, divided by the cash you actually put in. The division is the easy part, so this page also does the parts people get wrong: it derives the payment from the loan quote, counts the closing costs in the denominator, and says plainly what the number ignores.
The same deal at nearby coupons
Every basis point of coupon comes straight out of the year-one cash flow, and the equity does not change, so the return moves fast. This is what a 50 basis point negotiation is worth on this deal.
| Rate | Annual debt service | Year-one cash flow | Cash-on-cash |
|---|---|---|---|
| 5.50% | $442,875 | $157,125 | 4.25% |
| 6.00% | $467,649 | $132,351 | 3.58% |
| 6.50%This scenario | $493,013 | $106,987 | 2.89% |
| 7.00% | $518,936 | $81,064 | 2.19% |
| 7.50% | $545,387 | $54,613 | 1.48% |
Year-one, pre-tax, and before capital expenditure, on the standard amortizing payment. The denominator here is price less loan plus closing costs; a real sources-and-uses adds financing costs, funded capital, and initial reserves, every one of which lowers the reported return. Principal paydown, appreciation, taxes, and the sale are not in this number at all.
Cash-on-cash is one year of one scenario, and year one is often the least representative year a deal has. A real underwriting builds the NOI from the rent roll and the T-12, runs every year of the hold, and reports cash-on-cash by year next to the levered IRR, the equity multiple, and the after-tax version. Altyst reads the documents and builds all of it.
One subtraction, one division, one honest denominator
Cash-on-cash return is a year's cash flow after debt service divided by the total cash invested. For year one the numerator is the NOI minus the annual loan payment. The denominator is every dollar that left your account: the price less the loan, plus closing costs, and in a real sources-and-uses also financing costs, funded capital, and initial reserves. Most of the errors in quoted cash-on-cash figures live in that denominator, because every omitted line makes the return look better. This calculator takes closing costs as a first-class input for exactly that reason.
The thing to hold onto is that this is the distribution metric, not the performance metric. It answers one question: does the deal pay you while you hold it. For an income-oriented investor that question can be the binding one, and a deal with a superb IRR built entirely on the sale can still fail it.
A worked example
Take the deal the calculator loads with: a $10,000,000 property producing $600,000 of NOI, bought with a $6,500,000 loan at 6.5% on thirty-year amortization, with 2% of closing costs. The cash invested is $3,700,000: the $3,500,000 gap between price and loan, plus $200,000 of closing costs. The loan costs $493,013 a year, leaving $106,987 of year-one cash flow, which is a 2.89% cash-on-cash. Not a flattering number, and that is the point: at today's coupons a 6% cap deal at 65% leverage pays thinly while it amortizes, and a calculator that shows otherwise is using a different loan or a lighter denominator.
- The denominator moves the answer. Drop the closing costs and the same cash flow over $3,500,000 reads 3.06% instead of 2.89%. Seventeen basis points from one omitted line, on a metric investors screen to the tenth of a point.
- Interest-only flatters it. The same loan interest-only costs $422,500 in year one, and the cash-on-cash jumps to about 4.8%. Nothing about the deal improved; the loan simply defers principal, and the number steps back down the month amortization begins.
- The coupon comes straight out of the return. Fifty basis points more rate costs about $25,900 of year-one cash flow, which is 70 basis points of cash-on-cash on unchanged equity. The table under the calculator shows the whole curve.
What the number ignores
Cash-on-cash is pre-tax, single-year, and blind to everything that happens after December. Principal paydown is excluded even though it is building your equity every month. Appreciation and the eventual sale, which usually carry most of a deal's total return, are not in it at all. Taxes are not in it either, and depreciation means the after-tax cash flow can look meaningfully different from the pre-tax number. None of that makes the metric wrong; it makes it one instrument on a panel. The comparison of the three return lenses, and when each is the right one, is written out in cap rate versus cash on cash versus IRR, and the glossary entry carries the formal definition and the classic denominator mistake.
Year one is often the least representative year
A value-add deal typically shows a thin or negative year one while units turn, rising into the mid single digits as the plan lands. A stabilized deal shows a flat series. An interest-only period props the early years up and then hands the payment step-up to whoever modeled it honestly. This is why the metric is reported year by year in a real underwriting, and why averaging the series into one number hides exactly the shape you are being offered. This page computes year one on the amortizing payment and tells you when the IO version is flattering you; the year-by-year series is a model's job.
The loan behind the number
The debt service here comes from a loan amount you typed, but a lender does not take that number on faith: proceeds are sized against loan to value, minimum coverage, and minimum debt yield, and the smallest answer wins. If your typed loan fails those tests, the cash-on-cash it produces is a return on financing you cannot get. The loan sizing calculator runs the three tests and names the binding one, and the DSCR calculator turns the coverage covenant into dollars of cushion.
What this page does not do
It does not tell you what return to demand; that depends on the risk, the market, and your alternatives, and a static page asserting a hurdle would be guessing. The framework for judging one, starting from the loan constant that decides whether leverage helps, is written out in what is a good cash-on-cash return. It does not model the years after year one, the refinance, or the sale. And it is not advice: it is arithmetic on the numbers you typed, stated with the conventions it uses, and nothing more.
Questions
What is cash-on-cash return?
A year's cash flow after debt service divided by the total cash invested, expressed as a percentage. For year one that is NOI minus annual debt service, over the down payment plus closing costs and any other cash that left your account. It measures whether the deal pays you while you hold it, which is a different question from whether it is a good deal overall.
What is a good cash-on-cash return?
There is no universal number, and the metric is easy to push around, so treat any quoted benchmark with suspicion. The same property shows a higher cash-on-cash with more leverage (until the coupon exceeds the cap rate, when leverage cuts the other way), with an interest-only loan, or with closing costs quietly left out of the denominator. Compare deals only after fixing the leverage, the loan structure, and the denominator convention, and read the number next to the IRR and equity multiple rather than instead of them.
Does cash-on-cash include principal paydown?
No. The amortizing part of the payment reduces the loan balance, and that equity build is real, but it is not cash in your pocket, so it is excluded from the numerator while the full payment is deducted. This is why an amortizing loan shows a lower cash-on-cash than an interest-only loan on the same building: part of what looks like lost yield is actually principal you are repaying to yourself, and it comes back at sale or refinance.
Is cash-on-cash before or after taxes?
This calculator, and most quoted figures, are pre-tax. Depreciation usually shelters part of the cash flow, so the after-tax picture can be better than the pre-tax number suggests, and it differs by investor. A page that does not know your tax position cannot honestly compute it, which is why the after-tax version belongs in a full model rather than a calculator.
What is the difference between cash-on-cash and cap rate?
The cap rate is unlevered: NOI over price, the property's own yield, identical for every buyer. Cash-on-cash is levered: it moves with your loan, your rate, and your closing costs. The spread between them is the work the debt is doing. When the loan constant is below the cap rate, leverage lifts the cash-on-cash above the cap rate; when rates rise past the cap rate, the same leverage drags it below, which is negative leverage and this calculator will show it to you.
What is the difference between cash-on-cash and IRR?
Cash-on-cash is one year and ignores the sale. The internal rate of return covers every cash flow across the whole hold, including the exit, weighted by when each dollar arrives. A deal with a thin year-one cash-on-cash can carry an excellent IRR if the income grows or the exit is strong, and a fat year-one yield can hide a weak total return. They answer different questions, and the honest presentation shows both.
Can I put this calculator on my own website?
Yes, and it takes one line of HTML. There is no account and no key to request, so nothing can expire and break your page a year from now. The framed version loads no advertising script, ours or anyone else's, and sets no cookie on your readers. Keep the credit line under it and it is yours to use, including on a commercial site. The code is on the embed page.
Do you store what I type?
Not the figures. The math runs in your browser, nothing you type is sent to us, and there is no account or email field. Your scenario is written into the page address so you can bookmark it or send it to a partner, which does mean a link you share carries your figures with it. The page does carry the site's normal cookies, which the cookie notice lists; the embeddable version carries none.
Year one is one row of the model
Altyst reads the offering memorandum, the rent roll, and the T-12, builds the NOI this page asks you to type, and reports cash-on-cash for every year of the hold next to the levered IRR, the equity multiple, and the after-tax version.