What is a good cash-on-cash return in real estate?

A good cash-on-cash return on a financed long-term rental is 8 to 12%. Above 12% is excellent. Between 4 and 8% is fair and common in appreciating markets. Below 4% the return depends on appreciation and loan paydown rather than income.

The benchmark is a risk premium over low-risk savings. A rental is illiquid, takes work, and can produce a vacancy or a roof in any year, so investors want a cash yield well above what a deposit pays.

It moves with interest rates and markets. At 4% mortgage rates a 10% return was ordinary; at 7% the same property returns closer to 6%. Cheap Midwest and Southern markets still produce 8 to 12%. Coastal metros rarely exceed 5%, and investors there buy for appreciation. Set your own target, 8% is a reasonable one, and apply it with honest vacancy, management and reserve assumptions.