Cash-on-cash vs cap rate
Cash-on-cash return is investor-specific because it depends on cash invested and financing. Cap rate is property-level and excludes financing.
Example
If annual cash flow after debt service is 12,000 and cash invested is 100,000, cash-on-cash return is 12%. If annual debt service is entered separately, subtract it before comparing return to cash invested.
Common mistakes
Do not compare cash-on-cash returns unless the same costs are included. Vacancy, repairs, property management, reserves and financing assumptions can change the result sharply.
Limitations
This estimate does not include appreciation, tax effects, refinancing, major repairs, sale proceeds or changes in rent and interest rates.
Last reviewed: 2026-05-17