What a 10% Cash on Cash Return Looks Like

A 10% cash on cash return means the property pays you $10 a year for every $100 of cash you put into it. That is a good return for a financed long-term rental. It clears most investors' hurdle rate, covers real operating costs, and leaves appreciation and loan paydown as upside rather than the whole thesis.

A 10% return on a $500,000 rental

With 25% down and 3% closing costs, the cash invested is $140,000. A 10% return on that is $14,000 a year, or $1,167 a month, after every expense and the mortgage.

Rent needed: $5,690 a month (1.14% of price)
Collected after 5% vacancy: $64,866 a year
Operating expenses: $20,176 (31% of collected rent)
Net operating income: $44,690 (a 8.9% cap rate)
Debt service on the $375,000 loan: $30,698
Cash flow: $13,992 on $140,000 invested

The all-cash return on the same property at this rent would be 8.7%. Financing at 7.25% lifts the return because the loan costs less than the property yields.

Rent needed for 10% at other purchase prices

Same assumptions, different prices. The last column is rent as a percent of price, the quick screen investors use.

Price	Cash invested	Cash flow for 10%	Rent needed	Rent / price
$100k	$28,000	$2,800	$1,140	1.14%
$150k	$42,000	$4,200	$1,705	1.14%
$200k	$56,000	$5,600	$2,275	1.14%
$250k	$70,000	$7,000	$2,845	1.14%
$300k	$84,000	$8,400	$3,415	1.14%
$350k	$98,000	$9,800	$3,985	1.14%
$400k	$112,000	$11,200	$4,555	1.14%
$450k	$126,000	$12,600	$5,120	1.14%
$500k	$140,000	$14,000	$5,690	1.14%
$600k	$168,000	$16,800	$6,830	1.14%
$700k	$196,000	$19,600	$7,965	1.14%
$800k	$224,000	$22,400	$9,105	1.14%

How the down payment changes the rent needed

More cash in means a smaller loan and lower debt service, but also a bigger denominator. At 7.25% the two effects partly offset, and leverage still helps. On $500,000:

Down payment	Cash invested	Debt service	Rent for 10%
20%	$115,000	$32,744	$5,640
25%	$140,000	$30,698	$5,690
30%	$165,000	$28,651	$5,740
40%	$215,000	$24,558	$5,835
All cash	$515,000	$0	$6,420

Check your own deal against 10%

The calculator is loaded with the example above and a 10% target. Replace the numbers with yours.

Build both from the purchase, loan, rent and expenses

Cash on cash return

9.99%

Good

Good. Beats most passive alternatives after accounting for the work.

$13,992 cash flow / $140,000 invested

Annual numbers

Gross scheduled income: $68,280
Vacancy: -$3,414
Operating expenses31% of collected rent: -$20,176
Net operating income: $44,690
Debt service$2,558.16 a month: -$30,698
Annual cash flow: $13,992
Monthly cash flow: $1,166

Cash invested

Down payment: $125,000
Closing costs: $15,000
Upfront repairs: $0
Total cash invested: $140,000

Other metrics

Cap rateNOI / price: 8.94%
All-cash returnFinancing helps your return: 8.68%
DSCR (NOI basis): 1.46
Payback on cash: 10.0 yrs

To hit 10.0%

Cash flow neededper year: $14,000
Rent neededper month, vs $5,690 now: $5,691
Max price at this rentvs $500,000 now: $499,913

10% cash on cash return questions

Is a 10% cash on cash return good?

Yes. A 10% return sits inside the 8 to 12% range most rental investors target. It covers real operating costs and pays a meaningful yield on the cash in the deal.

How much rent do I need for a 10% cash on cash return?

On a $500,000 property with 25% down at 7.25% and the standard expense assumptions, about $5,690 a month. That produces $14,000 of annual cash flow on $140,000 invested. The rent needed scales with price and drops when you put more down.

What cash flow is a 10% return on $150,000 invested?

$15,000 a year, or about $1,250 a month. Multiply the cash you have in the deal by 0.1 to get the annual cash flow a 10% return requires.