Cash on Cash Return on a $350,000 Rental Property

A $350,000 rental bought with 25% down at 7.25% puts $98,000 of cash into the deal. At $3,150 rent it returns 2.0% on that cash. It needs about $3,775 in rent to reach 8% and $4,195 to reach 12%.

The numbers on a $350,000 rental

Assumptions: 3% closing costs, 5% vacancy, taxes at 1.2% of price ($4,200 a year), insurance at 0.5% ($1,750), and 5% maintenance, 5% capital reserves and 8% management on collected rent. Taxes especially vary by state, so replace them with the real bill.

Down payment: $87,500, closing costs $10,500, total cash invested $98,000
Loan: $262,500 at 7.25%, $1,791 a month, $21,489 a year
Rent: $3,150 a month, $35,910 collected after vacancy
Operating expenses: $12,414 (35% of collected rent)
Net operating income: $23,496, a 6.71% cap rate
Cash flow: $2,008 a year, $167 a month
Cash on cash return: 2.05%. All-cash return: 6.52%

Financing at 7.25% is hurting here: the all-cash return is higher than the financed one, so the loan costs more than the property yields. Every extra dollar borrowed lowers the return until rates fall or rent rises.

Return at different rents on a $350,000 property

Rent as a percent of price is the fastest screen. The old "1% rule" produces the row at 1.0%.

Monthly rent	Rent / price	Cash flow	Cash on cash	Cap rate
$2,100	0.6%	-$7,808	-8.0%	3.9%
$2,450	0.7%	-$4,536	-4.6%	4.8%
$2,800	0.8%	-$1,264	-1.3%	5.8%
$3,150	0.9%	$2,008	2.0%	6.7%
$3,500	1.0%	$5,279	5.4%	7.6%
$3,850	1.1%	$8,551	8.7%	8.6%
$4,200	1.2%	$11,823	12.1%	9.5%
$4,550	1.3%	$15,095	15.4%	10.5%

How the interest rate changes the return

At $3,150 rent and 25% down. Leverage flips from positive to negative where the loan's annual cost (payments as a share of the balance) passes the cap rate.

Rate	Debt service	Cash flow	Cash on cash	Leverage
5.00%	$16,910	$6,586	6.7%	Positive
5.50%	$17,885	$5,611	5.7%	Negative
6.00%	$18,886	$4,610	4.7%	Negative
6.50%	$19,910	$3,586	3.7%	Negative
7.00%	$20,957	$2,539	2.6%	Negative
7.25%	$21,489	$2,008	2.0%	Negative
7.50%	$22,025	$1,471	1.5%	Negative
8.00%	$23,114	$383	0.4%	Negative
8.50%	$24,221	-$725	-0.7%	Negative

How the down payment changes the return

At $3,150 rent and 7.25%. If leverage is negative, more down raises the return but ties up more cash for it.

Down	Cash invested	Debt service	Cash flow	Cash on cash
20%	$80,500	$22,921	$575	0.7%
25%	$98,000	$21,489	$2,008	2.0%
30%	$115,500	$20,056	$3,440	3.0%
40%	$150,500	$17,191	$6,305	4.2%
50%	$185,500	$14,326	$9,170	4.9%
All cash	$360,500	$0	$23,496	6.5%

Run the $350,000 deal yourself

Preloaded with the numbers above. Change the rent, rate, taxes or expenses to match your property.

Cash on cash return

2.05%

Weak

Weak. Cash yield is below a savings account. The return depends on appreciation and paydown.

$2,008 cash flow / $98,000 invested

Annual numbers

Gross scheduled income: $37,800
Vacancy: -$1,890
Operating expenses35% of collected rent: -$12,414
Net operating income: $23,496
Debt service$1,790.71 a month: -$21,489
Annual cash flow: $2,008
Monthly cash flow: $167

Cash invested

Down payment: $87,500
Closing costs: $10,500
Upfront repairs: $0
Total cash invested: $98,000

Other metrics

Cap rateNOI / price: 6.71%
All-cash returnFinancing hurts your return: 6.52%
DSCR (NOI basis): 1.09
Payback on cash: 48.8 yrs

To hit 8.0%

Cash flow neededper year: $7,840
Rent neededper month, vs $3,150 now: $3,774
Max price at this rentvs $350,000 now: $280,398

$350,000 rental questions

How much cash do I need to buy a $350,000 rental?

With 25% down and 3% closing costs, about $98,000: $87,500 down plus $10,500 in closing. Add any repairs before the first tenant. Most lenders also want three to six months of payments in reserves, which is not counted as cash invested.

What rent does a $350,000 property need for an 8% cash on cash return?

About $3,775 a month under the standard assumptions, which is 1.08% of price. For 12% it is $4,195. Lower taxes, self-management or a lower interest rate all bring the number down.

Is a $350,000 rental a good investment?

The price alone does not decide it. At $3,150 rent (0.9% of price) the cash on cash return is 2.0% with 25% down. The same property at $3,775 rent returns 8%. The rent-to-price ratio, the tax rate and your financing decide the return, not the price.