The LV5 Capital Cash-on-Cash Return Calculator estimates the annual yield on equity for a rental property or multifamily acquisition. Cash-on-cash is the most direct measure of how much cash a property pays its investor each year, calculated as annual pre-tax cash flow divided by total cash invested. Inputs include purchase price, down payment percent, closing costs, rehab, annual gross rent, vacancy percent, operating expense ratio, interest rate, and loan term. Outputs include cash-on-cash return, cap rate, debt service coverage ratio (DSCR), net operating income, annual debt service, annual cash flow, and total cash invested.
Cash-on-cash return (CoC) is the annual pre-tax cash flow a property generates divided by the total cash an investor put in. It measures the yield on your equity in a single year — typically the first stabilized year — and ignores appreciation, principal paydown, and the eventual sale.
Cash-on-Cash Return = Annual Pre-Tax Cash Flow divided by Total Cash Invested. Annual Pre-Tax Cash Flow = Net Operating Income minus Annual Debt Service. Total Cash Invested = Down Payment + Closing Costs + Capital Improvements (any cash you put in to acquire and stabilize the property).
Most direct multifamily owners target 6-10% cash-on-cash in Year 1, with the goal of growing it to 10-15%+ as rents rise and operations improve. Passive Limited Partners commonly receive a 6-9% preferred return on the cash side. Cash-on-cash above 10% in Year 1 typically requires either heavy leverage, a strong market, or sub-market acquisition pricing.
Cap rate is unleveraged: NOI divided by Purchase Price. It measures the property's yield ignoring how the deal is financed. Cash-on-cash is leveraged: it incorporates the mortgage payment and is calculated against your actual cash invested. A 6% cap rate property financed at 70% LTV at a low rate can produce a 10%+ cash-on-cash return.
No. Cash-on-cash is a pre-tax cash metric that ignores non-cash items like depreciation. Depreciation matters for after-tax returns and the K-1 you receive each year, but it doesn't change the actual cash that hits your account. Many syndication LPs receive cash distributions that look low on a tax basis because depreciation shelters them.
Year 1 is typically the lowest cash-on-cash year because operations have not yet stabilized, value-add renovations are in progress, and rents have not yet been pushed to market. As units are renovated and rolled to higher rents, NOI rises and cash-on-cash grows. Many sponsors quote both Year 1 and stabilized Year 3 cash-on-cash to show that progression.
Higher leverage generally boosts cash-on-cash return — until the debt service starts eating into cash flow. Putting 25% down on a $1M property at a 6% rate produces much higher cash-on-cash than putting 50% down on the same property, because the same NOI is divided by a smaller equity slice. Risk increases with leverage, so the goal is to find the right balance, not the highest possible CoC.
Preferred return (pref) is a contractual minimum return paid to LPs before the GP earns any promote — typically 6-9% per year. Cash-on-cash is the actual cash distribution received in a given year, which may be at, above, or below the pref depending on operations. Shortfalls on a cumulative pref accrue and are paid before profit splits at exit.
Explore the rest of LV5 Capital's investor calculator suite: Real Estate ROI Calculator · Real Estate IRR Calculator · Equity Multiple Calculator · Cash-on-Cash Return Calculator · 1031 Exchange Calculator. Read more in the multifamily investing guide or schedule a consultation.