What Is Cash-on-Cash Return?
Cash-on-cash (CoC) return measures the annual pre-tax cash flow you receive relative to the total cash you invested — including down payment, closing costs, and any initial repairs. Unlike cap rate, it accounts for your financing. Unlike IRR, it only measures year-one performance.
What Is a Good Cash-on-Cash Return?
- Below 5%: Common in appreciation markets (Bay Area, NYC). You're buying equity growth, not income.
- 5–8%: Acceptable in most markets. Covers carry with modest upside.
- 8–12%: Strong cash flow. Typical target for serious rental investors.
- 12%+: Exceptional. Usually found in secondary/tertiary markets or value-add plays.