By Brandon Sooknanan, Founder of StatementReady
Cash on cash return looks at first-year cash flow after mortgage principal and interest against cash put into the property in a loan file. The cash-on-cash calculator shows the pieces.
Inputs
Purchase price, down payment, closing costs, optional other cash in (such as repairs paid up front); optional loan amount (blank = price minus down payment; 0 = no loan); annual rate (no default), term in years; monthly gross rent, optional vacancy percent (no default), monthly operating expenses excluding mortgage.
Formula and outputs
Annual cash flow = NOI − annual debt service. Debt service = 12 × monthly P&I using standard amortization at the loan amount, rate and term entered. No loan means $0 debt service. Cash invested = down payment + closing costs + other cash. Cash on cash return = annual cash flow ÷ cash invested, as a percent rounded to two decimals. Outputs: return, annual cash flow, annual NOI, annual debt service and cash invested.
Worked example (page numbers only)
- Price $400,000; down payment $100,000 + closing costs $10,000 → $110,000 invested
- Loan $300,000 at an entered 6% over 30 years → $1,798.65/month, $21,583.80/year
- NOI $24,000 from $36,000 rent, 5% vacancy and $10,200 annual expenses → cash flow $2,416.20
- $2,416.20 ÷ $110,000 → 2.20%
Round numbers for illustration only; the rate, term and expenses are inputs, not defaults. The 5% vacancy is also an entered input, not a default or rule.
Negative cash flow
Cash flow and return can be negative when debt service exceeds NOI. Do not turn the example into a forecast or return target.
What it doesn't do
- First-year cash figure; excludes taxes on income, depreciation, principal paydown and appreciation
- Sets no rate, term, vacancy or expense figure
- No lending decision
- Runs in the browser; what you type isn't sent or stored
Related free tools: cap rate calculator (ignores financing), DSCR calculator, rental income calculator, all free tools.
When you're ready to work from the real statements, StatementReady checks whether each statement's transactions add up to its printed balances. It assists review of loan files; the lender makes all underwriting decisions.
Not legal or tax advice. StatementReady isn't affiliated with or endorsed by Fannie Mae or any lender named here.
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