Cash-on-cash return
Real EstateDefinition
Annual pre-tax cash flow divided by total cash invested. Measures the actual cash yield on the equity you put into a deal — not paper return. Particularly useful for leveraged real estate, where cap rate alone doesn't capture the financing magnification.
Healthy targets: 8-12% in stabilized deals; 15%+ in value-add; double-digit hurdle for syndication GPs. Doesn't account for principal paydown, appreciation, or tax benefits — so cash-on-cash is a floor, not the full return.
Healthy targets: 8-12% in stabilized deals; 15%+ in value-add; double-digit hurdle for syndication GPs. Doesn't account for principal paydown, appreciation, or tax benefits — so cash-on-cash is a floor, not the full return.
Formula
CoC = Annual cash flow / Total cash invested
Example
You buy a $500K property with $100K down, leveraging $400K at 6.5%. Annual NOI $35K, mortgage P&I $30K, leaving $5K of cash flow. Cash-on-cash = $5K / $100K = 5%. Disappointing on cash flow alone, but appreciation + paydown still might deliver a 15% IRR.
Related tool
Open the realestate tool on Arsenal.finance →