Step 1: Monthly cash flow
Subtract operating expenses and your mortgage payment from monthly rent. That's the cash the property actually puts in your pocket each month.
Step 2: Annualize
Multiply monthly cash flow by 12 to get annual pre-tax cash flow.
Step 3: Divide by cash invested
Divide annual cash flow by your total cash invested (down payment + closing costs + rehab), then multiply by 100. Example: $500/mo → $6,000/yr ÷ $60,000 = 10%.
Frequently asked questions
What's the cash-on-cash formula?
Annual pre-tax cash flow ÷ total cash invested × 100.
Does it include the mortgage?
Yes — cash flow is after the mortgage payment, and cash invested includes your down payment.
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.