Cash-on-Cash Return Calculator and Formula

By Skyline Capital Investments · Updated October 26, 2026

What the cash-on-cash return calculator measures

A cash-on-cash return calculator shows what your own cash earns in one year after the mortgage is paid. If you invest $600,000 and the building puts $42,000 in your pocket after debt service, your cash-on-cash return is 7%.

Cap rate describes a property as if it were bought without a loan. Most apartment buildings are financed, so investors also want the return on the cash they actually invested. Cash-on-cash return answers that for a single year, using cash flow before income taxes.

Because it includes financing, the same building can produce very different cash-on-cash returns for different buyers. A larger loan or a lower interest rate raises the return on a smaller amount of cash. A smaller loan or a higher rate lowers it. That makes the number useful for choosing between loan offers on one building, and less useful for comparing two buildings bought with different financing.

The cash-on-cash return formula

Cash-on-cash return equals annual pre-tax cash flow divided by total cash invested, multiplied by 100. Each piece is built from a short sum.

• Annual pre-tax cash flow = net operating income minus annual debt service (principal and interest).
• Total cash invested = down payment + closing costs + upfront rehab or reserves paid in cash.
• Cash-on-cash return = annual pre-tax cash flow ÷ total cash invested × 100.

How to use the calculator

Enter five numbers: annual NOI, annual debt service, down payment, closing costs, and upfront rehab or reserves. The calculator returns annual pre-tax cash flow, total cash invested, the cash-on-cash return and, when you enter debt service, the debt service coverage ratio.

If you don’t know the NOI yet, build it first with the NOI calculator. If you know the loan terms but not the payment, the DSCR calculator returns the annual debt service; copy that figure here. With the default inputs ($180,000 NOI, $120,000 of debt service and $825,000 of cash in), the result is $60,000 of cash flow and a 7.27% cash-on-cash return at 1.5x coverage.

A worked example

An investor buys a building for $2,000,000 with 25% down, or $500,000. Closing costs are $40,000 and an initial rehab of vacant units costs $60,000, so total cash invested is $600,000.

The $1,500,000 loan is at 6% over 30 years, which costs about $107,900 a year. The building produces $150,000 of NOI, leaving pre-tax cash flow of about $42,100. Cash-on-cash return is $42,100 ÷ $600,000 = 7.0%.

Now change one input. With 35% down ($700,000) the loan falls to $1,300,000 and payments to about $93,500. Cash flow rises to $56,500 and cash invested rises to $800,000, so the return edges up to about 7.1%. Each extra dollar of down payment saves the loan constant (the yearly payment as a percentage of the loan), about 7.2% here. More cash in raises the return only when the loan constant is above your current cash-on-cash return. When a loan costs less than that, borrowing more raises the return instead, along with the risk.

Second example: one building, four ways to finance it

The same building can show a cash-on-cash return anywhere from about 4% to 10% depending only on the loan. The table keeps the first example’s numbers fixed: a $2,000,000 price, $150,000 of NOI (a 7.5% cap rate), $40,000 of closing costs and $60,000 of rehab. Only the financing changes.

• All cash: the return is 7.14%, a little under the 7.5% cap rate, because closing costs and rehab are part of the cash invested.
• 6% amortizing loan: the loan constant is about 7.2%, just under the 7.5% cap rate, so borrowing $1,500,000 barely moves the return. You keep $1,500,000 of your own cash free, but take on the loan risk.
• 7.5% amortizing loan: the loan constant rises to about 8.4%, above the cap rate. That is negative leverage, and the return drops to about 4%, well below the all-cash figure.
• Interest-only at 6%: the return jumps to 10% because no principal is being paid. When amortization starts, the payment rises to the $107,919 in the second row and the return falls back to about 7%.

Cash-on-cash return formula in Excel

To set up the cash-on-cash return formula in Excel, put each input in its own cell, use the PMT function for the loan payment, and divide cash flow by total cash invested. The layout below uses column A for labels and column B for values, matching the worked example.

Excel’s PMT function takes the rate per period, the number of payments and the loan amount: PMT(rate, nper, pv). For monthly payments, Microsoft’s documentation says to divide the annual rate by 12 and multiply the years by 12. PMT returns a negative number because the payment is money going out, so put a minus sign in front to keep debt service positive.

Format B12 as a percentage. Change B2’s down payment share or B8’s rate and the return updates at once. To compare loan offers, copy column B into columns C and D and change only the loan inputs.

Adding more detail to the spreadsheet

Once the basic sheet works, a few extra rows make it closer to how lenders and experienced buyers underwrite. Add a row for an annual capital reserve below NOI, for example =B13*units with a per-unit figure in B13, and subtract it in the cash flow line. Add a row for an interest-only option: debt service becomes =B7*B8 in those years.

For a multi-year view, put years 1 through 5 across the columns, grow NOI by a rate in its own cell, and repeat the cash flow and return formulas in each column. That shows whether a low first-year return climbs as rents rise. It still won’t capture principal paydown or sale proceeds; for that, use an internal rate of return. Excel’s IRR function takes a range of yearly cash flows that starts with the negative cash invested.

What moves cash-on-cash return up or down

Four inputs drive the result: NOI, the interest rate, the loan size and the amortization period. A change in any one of them moves cash flow, cash invested or both.

• NOI: every $1,000 of added yearly NOI goes straight to cash flow. On $600,000 of cash invested, that is about 0.17 percentage points of return.
• Interest rate: on a $1,500,000, 30-year loan, each 0.25% change in rate moves debt service by roughly $3,000 a year.
• Amortization: a 25-year schedule costs more each year than a 30-year schedule at the same rate, so it lowers cash flow even though it builds equity faster.
• Interest-only periods: they raise early cash flow and the early return, but the return drops when amortization starts. Run both cases.
• Upfront costs: loan fees, rate buydowns and immediate repairs all count as cash invested, so they lower the return even when they improve the building.

Year-one return vs stabilized return

For a value-add building, calculate cash-on-cash return at least twice: once on the income the building has today, and once on the income you expect after renovations and lease-up. The first number tells you how much cash you may need to carry the property. The second shows whether the plan is worth the work.

Here is the gap in numbers. Use the first worked example’s loan, $107,919 a year, and $600,000 of cash invested. If the building produces $120,000 of NOI today because several units are vacant for renovation, cash flow is $12,081 and the year-one return is about 2.0%. If the plan works and NOI reaches $150,000, cash flow becomes $42,081 and the return is about 7.0%. The first figure tells you to hold enough reserves to carry a thin year. The second is only a target until the new leases are signed.

Run both cases in the calculator by changing only the NOI field. If the year-one figure is negative, add the shortfall to the cash you plan to keep on hand, since it is money you will put in before the building pays you back.

Be careful with the second figure. It is a projection, not a result, and it depends on rents you have not yet signed. Lenders and experienced buyers discount it, and so should you. Use rents from recently leased comparable units, not asking rents, and add the time it takes to renovate and re-lease each unit.

How to read the result

Compare the result with what the same cash could earn elsewhere at a similar level of risk and effort. If cash-on-cash return is below the property’s cap rate, the loan costs more than the building earns on each borrowed dollar. That is called negative leverage. It can still make sense when you expect income to grow, but it should be a conscious choice.

Cash-on-cash return is a one-year snapshot. It leaves out principal paydown, appreciation and tax effects such as depreciation, and it ignores the timing of cash flows over a hold period. For the full picture, pair it with a multi-year projection, the equity multiple and the IRR.

Cash-on-cash return vs cap rate vs ROI

The three measures answer different questions, so use them together rather than picking one.

• Cap rate: NOI ÷ price. The building’s yield with no loan. Use it to compare buildings and estimate value.
• Cash-on-cash return: cash flow after debt service ÷ cash invested. Your yield in one year with your loan. Use it to compare financing options on the same building.
• ROI: a broad term that can include appreciation, principal paydown and sale proceeds. Ask how anyone quoting ROI defined it.
• IRR: the return that accounts for the timing of every cash flow over the hold, including the sale. Use it for multi-year comparisons.

Cash-on-cash return on a building you already own

For a building you own, the useful version of the formula uses your equity today, not the cash you put in years ago. Take the current market value, subtract the loan balance and estimated selling costs, and use that figure as cash invested. Then divide this year’s cash flow by it.

Here is why it matters. An owner who put $400,000 into a building in 2014 and now takes home $60,000 a year sees a 15% return on original cash. If the building is worth $3,000,000 today with a $1,200,000 loan and about $150,000 of selling costs, the equity is about $1,650,000, and the same $60,000 is a 3.6% return on that equity. That lower number is the honest one to compare with selling, refinancing or a 1031 exchange into a different building.

Skyline Capital buys 5+ unit apartment buildings. We buy directly, close on your timeline, and can work inside 1031 deadlines. If your return on equity has fallen this far, it can be worth seeing what a sale would free up.

Common mistakes

These errors make returns look better than they are.

• Leaving closing costs, loan fees or rehab out of cash invested.
• Using interest-only payments when the loan will amortize after a short period.
• Starting from a seller’s NOI without adjusting taxes, insurance and management to your ownership.
• Ignoring capital reserves, which come out of cash flow even though they are not in NOI.
• Using stabilized NOI for a building that will take a year or more to lease up.