Calculate your actual return on invested equity after debt service. See how leverage amplifies (or reduces) your returns compared to an all-cash purchase.
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The metric that tells you what your actual equity is earning.
Cap rate measures the property's unlevered return (NOI ÷ Price). Cash-on-cash measures YOUR return on invested equity after debt (Cash Flow ÷ Total Cash Invested). With favorable leverage, CoC exceeds cap rate. With expensive debt, CoC can be lower than cap rate.
Positive leverage occurs when the cap rate exceeds the loan constant (annual debt service ÷ loan amount). This means debt amplifies your return. When the loan constant exceeds the cap rate, leverage is negative — you'd earn more paying all cash.
For stabilized CRE: 8–12% is considered strong. Below 6% may not justify the risk and management effort. Above 15% is exceptional and often found in value-add deals. Your target should depend on risk, market, and alternative investment opportunities.
Increase NOI (raise rents, reduce expenses, fill vacancy), negotiate better financing (lower rate, longer amortization, interest-only period), or reduce upfront equity (higher LTV, seller financing). Our advisors model multiple scenarios to optimize your return.
Every calculator we offer, in one place — run the next number your lender will ask about.
Common questions about cash-on-cash returns in CRE investing.
For stabilized properties, 8–12% is considered strong. Below 6% may not justify the effort and risk compared to passive investments. Above 15% is exceptional and often found in value-add or opportunistic deals. Your target should reflect the risk level and your alternative investment options.
Cash-on-cash measures annual pre-tax cash flow against total cash invested — it is a single-year metric. ROI (or IRR) measures total return over the entire hold period including appreciation, principal paydown, and tax benefits. CoC tells you what your cash is earning right now; IRR tells you the total picture.
No. Cash-on-cash only measures current income return — annual cash flow divided by cash invested. Property appreciation, mortgage paydown (equity buildup), and tax benefits are not included. For total return analysis, use Internal Rate of Return (IRR) instead.
Positive leverage means your cap rate exceeds the loan constant (annual debt service ÷ loan amount), so borrowing amplifies your return above the cap rate. Negative leverage means the debt costs more than the property earns — you would have earned more paying all cash.
Three levers: (1) Increase NOI — raise rents, cut expenses, reduce vacancy. (2) Optimize financing — lower rate, longer amortization, interest-only period, higher LTV. (3) Negotiate purchase price down. Even small changes compound — a 0.5% rate reduction on a $1M loan saves ~$5K/year.
We model multiple financing scenarios to find the structure that maximizes your cash-on-cash return while maintaining comfortable DSCR coverage. This might mean finding the lowest rate, negotiating an interest-only period, or structuring with SBA for minimum down payment.
Our advisors structure your deal for the best cash-on-cash return — optimizing the balance between leverage, rate, and cash flow.
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