How do you calculate cash-on-cash return when evaluating a rental property?

Question

I'm curious how other investors calculate cash-on-cash return when screening rental properties.

I usually look at the purchase price, down payment, financing, annual rental income, and operating expenses before estimating the annual cash flow.

For example, if a property requires $60,000 of cash invested and generates $6,000 in annual pre-tax cash flow, the cash-on-cash return would be:

$6,000 ÷ $60,000 × 100 = 10%

For those who regularly analyze deals, do you calculate this manually in a spreadsheet, or do you use a real-estate calculator?

I've also been testing different ways of making the calculation quicker when comparing multiple properties.

What numbers do you consider essential before deciding whether a property is worth deeper analysis?

Caleb Brown · Answer

I use a spreadsheet in Google Sheets

Halenah Eva · Answer

I usually start with the basic numbers in a spreadsheet as well. For me, the key figures are total cash invested, realistic rental income, vacancy, operating expenses, financing costs, and the resulting annual cash flow. Once the initial numbers look reasonable, I’ll dig deeper into the property and financing assumptions before making a decision.

How do you calculate cash-on-cash return when evaluating a rental property?

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