What a 15% Cash on Cash Return Looks Like

A 15% cash on cash return means the property pays you $15 a year for every $100 of cash you put into it. That is an excellent cash yield. Returns at this level usually come from low-cost markets, heavy value-add, small multifamily or short-term rentals, and they deserve a second look at the expense assumptions that produced them.

A 15% return on a $500,000 rental

With 25% down and 3% closing costs, the cash invested is $140,000. A 15% return on that is $21,000 a year, or $1,750 a month, after every expense and the mortgage.

Rent needed: $6,440 a month (1.29% of price)
Collected after 5% vacancy: $73,416 a year
Operating expenses: $21,715 (30% of collected rent)
Net operating income: $51,701 (a 10.3% cap rate)
Debt service on the $375,000 loan: $30,698
Cash flow: $21,003 on $140,000 invested

The all-cash return on the same property at this rent would be 10.0%. Financing at 7.25% lifts the return because the loan costs less than the property yields.

Rent needed for 15% 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 15%	Rent needed	Rent / price
$100k	$28,000	$4,200	$1,290	1.29%
$150k	$42,000	$6,300	$1,930	1.29%
$200k	$56,000	$8,400	$2,575	1.29%
$250k	$70,000	$10,500	$3,220	1.29%
$300k	$84,000	$12,600	$3,865	1.29%
$350k	$98,000	$14,700	$4,510	1.29%
$400k	$112,000	$16,800	$5,150	1.29%
$450k	$126,000	$18,900	$5,795	1.29%
$500k	$140,000	$21,000	$6,440	1.29%
$600k	$168,000	$25,200	$7,730	1.29%
$700k	$196,000	$29,400	$9,015	1.29%
$800k	$224,000	$33,600	$10,305	1.29%

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 15%
20%	$115,000	$32,744	$6,255
25%	$140,000	$30,698	$6,440
30%	$165,000	$28,651	$6,620
40%	$215,000	$24,558	$6,985
All cash	$515,000	$0	$9,175

Check your own deal against 15%

The calculator is loaded with the example above and a 15% target. Replace the numbers with yours.

Build both from the purchase, loan, rent and expenses

Cash on cash return

15.00%

Excellent

Excellent. Double-digit cash yield on the money in the deal.

$21,003 cash flow / $140,000 invested

Annual numbers

Gross scheduled income: $77,280
Vacancy: -$3,864
Operating expenses30% of collected rent: -$21,715
Net operating income: $51,701
Debt service$2,558.16 a month: -$30,698
Annual cash flow: $21,003
Monthly cash flow: $1,750

Cash invested

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

Other metrics

Cap rateNOI / price: 10.34%
All-cash returnFinancing helps your return: 10.04%
DSCR (NOI basis): 1.68
Payback on cash: 6.7 yrs

To hit 15.0%

Cash flow neededper year: $21,000
Rent neededper month, vs $6,440 now: $6,440
Max price at this rentvs $500,000 now: $500,031

15% cash on cash return questions

Is a 15% cash on cash return good?

Yes. A 15% cash on cash return is well above the 8 to 12% most investors target on financed rentals. Check the expense assumptions, because returns this high often come from underestimating vacancy, repairs or management.

How much rent do I need for a 15% cash on cash return?

On a $500,000 property with 25% down at 7.25% and the standard expense assumptions, about $6,440 a month. That produces $21,000 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 15% return on $150,000 invested?

$22,500 a year, or about $1,875 a month. Multiply the cash you have in the deal by 0.15 to get the annual cash flow a 15% return requires.