What Is Cash-on-Cash Return and Why It Matters
Cash-on-cash return is the most important metric for rental property investors. Learn how to calculate it and what a good CoC looks like.
Cash-on-cash return (CoC) measures the annual pre-tax cash flow you earn relative to the total cash you invested. It's the single most practical metric for evaluating rental property deals because it tells you exactly how hard your money is working.
The Formula
CoC = (Annual Pre-Tax Cash Flow / Total Cash Invested) × 100
Annual Pre-Tax Cash Flow is your gross rental income minus all operating expenses and debt service (mortgage payments).
Total Cash Invested includes your down payment, closing costs, and any rehab or repair costs paid out of pocket.
A Quick Example
Say you buy a rental property for $200,000 with 20% down:
- Down payment: $40,000
- Closing costs: $5,000
- Total cash invested: $45,000
The property rents for $1,800/month. After mortgage, taxes, insurance, maintenance, and management fees, your monthly cash flow is $350.
- Annual cash flow: $350 × 12 = $4,200
- CoC return: $4,200 / $45,000 = 9.3%
That means for every dollar you put in, you're earning 9.3 cents per year in cash flow — before appreciation, equity paydown, or tax benefits.
What's a Good Cash-on-Cash Return?
There's no universal answer, but here are common benchmarks:
- Below 6% — Underperforming. You might do better in index funds with less work.
- 6–8% — Acceptable for stable, low-risk markets.
- 8–12% — Strong. This is what most active investors target.
- Above 12% — Excellent, but verify your assumptions. High CoC can signal higher risk.
EvelraOS defaults to an 8% CoC target, which you can customize per portfolio.
Why CoC Beats Cap Rate for Leveraged Investors
Cap rate ignores financing — it assumes you paid all cash. CoC accounts for your actual mortgage terms, which is why two investors can buy the same property and get very different returns depending on their loan.
If you're using leverage (and most investors are), CoC is the metric that reflects your real-world return.
How EvelraOS Uses CoC
Every property and prospect in EvelraOS is graded on CoC as one of five core metrics in the DealGrade scorecard. If your CoC falls below your target, the property's health status drops and the Action Center flags it. You can use Property Checkup to model changes — adjusting rent, expenses, or loan terms — and see your CoC update in real time.