Calculate your actual return on invested equity after debt service. See how leverage amplifies (or reduces) your returns compared to an all-cash purchase.
Your actual return on invested capital
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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.
Common questions about cash-on-cash returns in CRE investing.
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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