By David Parks · eXp Realty · The Apollo Group · 2 min read
Cash-on-cash return measures the annual pre-tax cash flow from a rental compared to the actual cash you invested. It shows how hard your own money is working.
Divide annual pre-tax cash flow by total cash invested. Cash flow is rent minus operating expenses and mortgage payments. Cash invested includes your down payment, closing costs, and repairs.
If you invest $100,000 in cash and earn $8,000 in annual cash flow after all costs and loan payments, the cash-on-cash return is 8 percent. This is a simple illustration only.
It accounts for financing, unlike cap rate. It helps compare how different down payments or loan terms affect your return.
It does not include appreciation, principal paydown, or taxes. It also depends on accurate rent and expense estimates.
Include vacancy, repairs, and capital expenses like roofs and furnaces. Many first-time investors underestimate costs.
Ask your agent to help estimate rents and expenses, and your lender to model financing options.
This article is general information, not legal, tax, financial or inspection advice. Every home and situation is different, so confirm details with a licensed inspector, lender, attorney or tax professional.
David is a Greater Denver real estate advisor with eXp Realty and The Apollo Group (Colorado broker license FA100103211). He has closed more than $55 million in volume, earned eXp Icon status in 2025, and holds a 5.0 rating on Zillow from 27 verified reviews.
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