Real Estate
定義
An investment metric that measures annual pre-tax cash flow relative to the total cash invested, expressing the yield on out-of-pocket capital in a real estate deal.
Cash-on-cash return (CoC) is a real estate investment metric that calculates the annual pre-tax cash flow generated by a property as a percentage of the total cash actually invested — including the down payment, closing costs, and any upfront renovation expenses. Unlike cap rate, which ignores financing, cash-on-cash return reflects the leverage effect of a mortgage, making it a more accurate measure of actual investor yield when debt is involved.
The formula is straightforward: Annual Pre-Tax Cash Flow ÷ Total Cash Invested × 100. For example, if an investor puts $80,000 into a rental property (down payment plus costs) and the property generates $6,400 in net annual cash flow after mortgage payments, operating expenses, and vacancies, the cash-on-cash return is 8%. This tells the investor they are earning 8 cents in cash for every dollar they deployed.
Cash-on-cash return is most useful for comparing leveraged investment properties against each other or against other asset classes. A well-performing rental property in most markets generates cash-on-cash returns in the range of 6% to 12%, though markets vary dramatically. Properties in high-appreciation, low-yield markets like San Francisco or New York City may have CoC returns of 2% to 4%, with investors betting on appreciation rather than cash flow. Value-add or emerging markets may offer 10% or more.
The metric has important limitations. It is a pre-tax, pre-appreciation figure. It does not account for mortgage principal paydown (a form of forced savings), depreciation tax benefits, or long-term property value growth. Sophisticated investors use cash-on-cash in combination with cap rate, net present value analysis, and internal rate of return to build a complete picture of investment performance.
Many first-time real estate investors make the mistake of purchasing properties that look profitable on paper but produce little or no monthly cash flow once real-world vacancies, maintenance, and management costs are factored in. Calculating an accurate cash-on-cash return before purchasing requires honest projections for all income and expense variables — an area where inexperience consistently leads to costly overestimates.
A real estate investment advisor or financial professional can help you build realistic pro formas, validate your assumptions against market data, and compare investment opportunities on an apples-to-apples basis. Overpaying for a property or underestimating operating expenses by even a modest margin can turn a seemingly attractive deal into a negative cash flow drain.