What Is a Good Cash on Cash Return on a Rental Property?

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 below 4% is weak. A negative return means the property costs you money every year.

Those bands are what most investors use as hurdle rates. They are not laws, and they move with interest rates, markets and property types. What matters more than the number is whether the assumptions that produced it would survive an underwriter.

Where the 8 to 12% benchmark comes from

The benchmark is a risk premium. A rental property is illiquid, takes work, and can produce a vacancy or a roof in any given year. Investors want to be paid more than a risk-free deposit for taking that on. When savings and Treasuries yield around 4 to 5%, a cash yield of 8% is a modest premium and 12% is a comfortable one.

It also reflects what was achievable. Through the 2010s, with rates near 4% and prices still recovering, 10% cash on cash was ordinary in much of the country. It anchored expectations that are now harder to meet.

How interest rates shift the benchmark

Rates change the return without changing the property. Take a $250,000 rental at $2,600 rent with 25% down and standard expenses:

Interest rate	Annual cash flow	Cash on cash
5.0%	$8,026	10.7%
6.0%	$6,615	8.8%
7.25%	$4,756	6.3%
8.0%	$3,595	4.8%

The same house is a “good” deal at 5% and a “fair” one at 7.25%. Investors buying in a high-rate period either accept a lower cash yield, put more down, or buy in cheaper markets where the rent-to-price ratio is higher. Many do the first and plan to refinance.

How the market shifts it

Rent-to-price ratio decides most of the outcome. A property renting for 1% of its price each month, the old “1% rule,” produces roughly an 8 to 10% cash on cash return at current rates with 25% down. The same screen in different units is a gross rent multiplier of 8.3, which the GRM calculator covers. At 0.7% of price it produces close to zero. At 1.2% it can exceed 15%.

Cheap Midwest and Southern markets often clear 1%. Coastal metros rarely exceed 0.5%. That is why a “good” return in Cleveland and a “good” return in San Diego are different numbers, and why San Diego investors talk about appreciation.

The purchase price pages show the return at each rent-to-price ratio for prices from $100,000 to $1.5 million.

How property type shifts it

Small multifamily (two to four units) typically produces one to three points more cash on cash than a single-family house at the same price, because rent per dollar of price is higher and fixed costs are shared. It also carries more turnover and management.

Condos run lower because HOA dues sit in the expense line and cannot be negotiated.

Short-term rentals can run anywhere from negative to 20% or more. Gross income is high, but furnishing adds to cash invested and operating costs consume 40 to 60% of revenue. The spread between well-run and badly run short-term rentals is wider than for any other property type.

Value-add deals, where you buy below market, renovate, and refinance, can show very high cash on cash returns because the refinance returns most of the cash invested. If you pull out all of it, the return is technically infinite. Treat those figures as a different metric.

The assumptions matter more than the number

Two investors can look at the same property and compute 5% and 11%. The difference is almost always in these lines:

• Vacancy. 0% versus 5% is about 1.7 points of return on a typical deal.
• Management. Omitting 8% management is about 3 points.
• Capital reserves. Omitting 5% reserves is about 2 points.
• Taxes. Using the seller’s bill instead of the reassessed one can be 1 to 2 points in high-tax states.
• Cash invested. Forgetting closing costs and make-ready understates the denominator by 10 to 20%.

A 10% return with 0% vacancy, no management and no reserves is a 4% return with honest inputs. Before you compare a deal to any benchmark, make sure the inputs would survive a lender’s underwriting. The formula guide lists the standard allowances.

Cash on cash is not the whole return

A 6% cash yield on a property appreciating 3% a year, with a loan paying down $1,800 a year, is an 18% total return on $75,000 of cash in year one. The cash on cash vs ROI guide covers how the pieces fit together.

That does not make a weak cash yield acceptable by default. Cash flow is the part of the return you can spend, and the part that keeps you solvent when the roof goes. Appreciation is a forecast. Most experienced investors set a cash on cash floor and treat appreciation as upside.

A practical hurdle rate

Set your own. A reasonable one for a financed long-term rental in 2026 is 6% minimum and 8% target, with honest expense assumptions. Go lower only with a specific reason: a below-market lease resetting soon, a market with documented rent growth, or a refinance planned when rates fall. Go higher if you are self-managing, taking on a rough property, or buying in a market with weak demand.

Then hold every deal to it. The calculator shows the rent or price that gets a deal to your target, which turns a hurdle rate into an offer.