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 $250,000 rental

With 25% down and 3% closing costs, the cash invested is $70,000. A 15% return on that is $10,500 a year, or $875 a month, after every expense and the mortgage.

Rent needed: $3,220 a month (1.29% of price)
Collected after 5% vacancy: $36,708 a year
Operating expenses: $10,857 (30% of collected rent)
Net operating income: $25,851 (a 10.3% cap rate)
Debt service on the $187,500 loan: $15,349
Cash flow: $10,502 on $70,000 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 $250,000:

Down payment	Cash invested	Debt service	Rent for 15%
20%	$57,500	$16,372	$3,130
25%	$70,000	$15,349	$3,220
30%	$82,500	$14,326	$3,310
40%	$107,500	$12,279	$3,495
All cash	$257,500	$0	$4,585

Check your own deal against 15%

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

Cash on cash return

15.00%

Excellent

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

$10,502 cash flow / $70,000 invested

Annual numbers

Gross scheduled income: $38,640
Vacancy: -$1,932
Operating expenses30% of collected rent: -$10,857
Net operating income: $25,851
Debt service$1,279.08 a month: -$15,349
Annual cash flow: $10,502
Monthly cash flow: $875

Cash invested

Down payment: $62,500
Closing costs: $7,500
Upfront repairs: $0
Total cash invested: $70,000

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: $10,500
Rent neededper month, vs $3,220 now: $3,220
Max price at this rentvs $250,000 now: $250,015

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 $250,000 property with 25% down at 7.25% and the standard expense assumptions, about $3,220 a month. That produces $10,500 of annual cash flow on $70,000 invested. The rent needed scales with price and drops when you put more down.

What cash flow is a 15% return on $75,000 invested?

$11,250 a year, or about $938 a month. Multiply the cash you have in the deal by 0.15 to get the annual cash flow a 15% return requires.