What Is a Good Cash-on-Cash Return on a Rental Property?

Cash-on-cash return measures what the money you actually put into a rental earns each year: annual pre-tax cash flow ÷ total cash invested, where cash invested is your down payment plus closing costs (plus any immediate repairs). Put $60,000 into a deal that clears $3,600 a year after every expense and the mortgage, and you’re earning 6% cash-on-cash.

Honest benchmarks

Anyone quoting a universal “good” number is selling something. What’s realistic depends on rates, market, and strategy:

• 4–7% — common for buy-and-hold single-family in decent neighborhoods at today’s rates, with appreciation and loan paydown doing part of the work.
• 8–12% — strong; usually requires a below-market purchase, a higher-yield market, or small multifamily.
• 12%+ — either an exceptional deal or an assumption error. Re-check the rent and the expense stack before celebrating.

Context matters: when treasuries pay ~4% risk-free, a 3% cash-on-cash only makes sense if you’re confident in rent growth, appreciation, or a future refinance.

The three mistakes that inflate it

• Optimistic rent. $150/mo of wishful rent on a $60k investment manufactures 3 points of fake return. Use comp-based estimates, not the listing agent’s “rental potential.”
• Missing reserves. Skipping vacancy, maintenance, and capital expenditures is the classic spreadsheet lie. Screen with 5–8% vacancy and 5–10% maintenance, minimum.
• Forgetting closing costs. They add 2–4% of the price to your cash invested, and shrink the return on day one.

Cash-on-cash is a screening metric, not the whole story

It ignores appreciation, principal paydown, and taxes, and it’s hostage to your financing — the same house produces very different numbers at different rates (see cap rate vs. cash-on-cash). For a fuller picture over a hold period, 10-year projections with IRR capture what a single-year ratio can’t. But for deciding which of thirty listings deserves your evening, cash-on-cash — computed with honest assumptions — is hard to beat.

Compute it on the listing itself

CashFlowPanel returns cash-on-cash, cash flow, cap rate, and break-even rent on any Zillow or Redfin listing in one click, with a comp-based rent estimate and every assumption editable. Pro adds 10-year projections and IRR per deal.