What a 9% Cash on Cash Return Looks Like

A 9% cash on cash return means the property pays you $9 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 9% return on a $500,000 rental

With 25% down and 3% closing costs, the cash invested is $140,000. A 9% return on that is $12,600 a year, or $1,050 a month, after every expense and the mortgage.

Rent needed: $5,540 a month (1.11% of price)
Collected after 5% vacancy: $63,156 a year
Operating expenses: $19,868 (31% of collected rent)
Net operating income: $43,288 (a 8.7% cap rate)
Debt service on the $375,000 loan: $30,698
Cash flow: $12,590 on $140,000 invested

The all-cash return on the same property at this rent would be 8.4%. Financing at 7.25% lifts the return because the loan costs less than the property yields.

Rent needed for 9% 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 9%	Rent needed	Rent / price
$100k	$28,000	$2,520	$1,110	1.11%
$150k	$42,000	$3,780	$1,660	1.11%
$200k	$56,000	$5,040	$2,215	1.11%
$250k	$70,000	$6,300	$2,770	1.11%
$300k	$84,000	$7,560	$3,325	1.11%
$350k	$98,000	$8,820	$3,880	1.11%
$400k	$112,000	$10,080	$4,435	1.11%
$450k	$126,000	$11,340	$4,985	1.11%
$500k	$140,000	$12,600	$5,540	1.11%
$600k	$168,000	$15,120	$6,650	1.11%
$700k	$196,000	$17,640	$7,755	1.11%
$800k	$224,000	$20,160	$8,865	1.11%

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 9%
20%	$115,000	$32,744	$5,520
25%	$140,000	$30,698	$5,540
30%	$165,000	$28,651	$5,565
40%	$215,000	$24,558	$5,605
All cash	$515,000	$0	$5,870

Check your own deal against 9%

The calculator is loaded with the example above and a 9% target. Replace the numbers with yours.

Build both from the purchase, loan, rent and expenses

Cash on cash return

8.99%

Good

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

$12,590 cash flow / $140,000 invested

Annual numbers

Gross scheduled income: $66,480
Vacancy: -$3,324
Operating expenses31% of collected rent: -$19,868
Net operating income: $43,288
Debt service$2,558.16 a month: -$30,698
Annual cash flow: $12,590
Monthly cash flow: $1,049

Cash invested

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

Other metrics

Cap rateNOI / price: 8.66%
All-cash returnFinancing helps your return: 8.41%
DSCR (NOI basis): 1.41
Payback on cash: 11.1 yrs

To hit 9.0%

Cash flow neededper year: $12,600
Rent neededper month, vs $5,540 now: $5,541
Max price at this rentvs $500,000 now: $499,884

9% cash on cash return questions

Is a 9% cash on cash return good?

Yes. A 9% 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 9% cash on cash return?

On a $500,000 property with 25% down at 7.25% and the standard expense assumptions, about $5,540 a month. That produces $12,600 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 9% return on $150,000 invested?

$13,500 a year, or about $1,125 a month. Multiply the cash you have in the deal by 0.09 to get the annual cash flow a 9% return requires.