Buy a $650,000 rental, put $280,000 of your own cash into it, and it hands back $4,819 a year after the mortgage. That’s a cash-on-cash return of 1.72%, or $401.56 a month, before income tax.
What does cash-on-cash return tell you?
It answers one narrow question. For every dollar you paid to get into the property, how much comes back this year? What you paid is the down payment plus closing costs and renovation. What comes back is rent, less vacancy and running costs, less the year’s mortgage payments.
One year, nothing more. It doesn’t give you credit for the slice of each payment that shrinks the loan, and it ignores any rise in the home’s value. For those you need a fuller model.
| Monthly rent | Cash flow per month | Cash-on-cash |
|---|---|---|
| $3,240 | $55.96 | 0.24% |
| $3,420 | $228.76 | 0.98% |
| $3,600 | $401.56 | 1.72% |
| $3,780 | $574.36 | 2.46% |
| $3,960 | $747.16 | 3.20% |
How the 1.72% is built
The defaults describe a $650,000 property with $260,000 down and $20,000 for closing and renovation, so $280,000 goes in. Net operating income is $31,772. The mortgage, at 4.9% over 25 years, takes $26,953 a year. What’s left is $4,819, or $401.56 a month, and $4,819 divided by $280,000 is 1.72%.
Look at how touchy that is. Rent 10% lower drops the return to 0.24% and the monthly cash flow to $55.96. Rent 10% higher lifts it to 3.20%. A few hundred dollars of rent moves the answer more than almost anything else you can type in.
Here’s a rule of thumb you can check against the table. With 4% vacancy, each extra $100 of monthly rent adds about $96 of cash flow a month, or $1,152 a year. On $280,000 invested that’s roughly 0.41 of a percentage point.
Now put in more of your own money. With $390,000 down, you’ve invested $410,000, the mortgage costs $17,969 a year, and cash flow climbs to $13,803. The return is 3.37%. Better on paper, but you’ve locked away $130,000 more to get it.
Is a bigger down payment always the better move?
Not necessarily. Look at what the extra $130,000 bought in that example: the yearly cash flow went from $4,819 to $13,803, a gain of $8,984. That’s about 6.9% on the added money (8,984 divided by 130,000), so it does pay. But it’s money you can’t touch if the furnace dies or a tenant leaves. Plenty of owners keep a cash cushion and accept a lower percentage for the breathing room.
Where this number misleads people
A big percentage on a small deposit can hide a weak property, so read the dollar cash flow next to the rate. And don’t leave closing costs and renovation out of the cash invested. It flatters the result.
The figure is before income tax. It also uses today’s rent and costs with no yearly growth, and repairs are a flat yearly amount here, when a real building can throw a large bill at you in a single year. A renewal at a higher rate would cut cash flow too, and the calculator doesn’t model that.
Rent counts as taxable income, so what lands in your account after the taxman is lower again. The rental income tax calculator gives a rough idea of how much of it stays with you.
What should you check next?
To look at the property with the loan stripped out, use the cap rate calculator. If you want value growth and total profit over several years, the rental property calculator is the better fit. The ROI calculator handles a general return on any investment, and the mortgage calculator shows how the payment moves with your rate and amortization.
The sources behind this page
The mortgage payment comes from the site’s mortgage engine. Income, vacancy and costs are whatever you type, starting from planning defaults and not market data. Look up real local rents and get an actual tax and insurance quote before you trust the answer. This website has no connection with any government body, and every figure is an estimate.
About this calculator
- What it does
- Measure the yearly cash a rental returns compared with the cash you put in.
- Category
- Real Estate
- Last checked
- September 30, 2026
- Result type
- Estimate for information only, not tax advice.
Frequently asked questions
What return do the default numbers give?
1.72%. That's $4,819 of yearly cash flow on $280,000 of your own money.
What counts as cash invested?
Your down payment, closing costs and renovation. In the default case that's $260,000 plus $20,000.
Does paying down the mortgage count as a return?
No. Only cash flow is measured, so principal you repay and any rise in the home's price are left out.
What happens if I put more down?
With $390,000 down you've invested $410,000 and cash flow is $13,803, so the return is 3.37%.
Is the return before or after tax?
Before. Income tax isn't in the figure, so what you actually keep is lower.
Sources and updates
Updated: . How we check rates · Editorial team · Updates