Cash-on-cash return helps investors compare the annual cash return against actual cash invested. It is useful because property investing often involves leverage, deposits, legal costs, furnishing, repairs and financing decisions that simple rental yield does not fully show.
Calculate invested cash clearly
Include deposit, stamp duty, legal fees, valuation, furnishing, initial repairs and any cash top-up. Then compare annual net cash flow after loan instalment, maintenance fees, vacancy and recurring costs.
Use PropGo's loan balance calculator to understand remaining financing exposure, especially when evaluating refinance or exit scenarios.
Avoid optimistic rent assumptions
Cash-on-cash return can look attractive if vacancy and repairs are ignored. Pair the calculation with PropGo's rental yield calculator to compare gross yield, net yield and practical cash flow.
High-income professionals should also consider time cost, management effort and liquidity. A property that looks profitable on paper may still be a poor fit if it creates operational drag.
FAQ
Is cash-on-cash return better than rental yield?
It answers a different question. Rental yield compares rent with property value; cash-on-cash compares cash return with cash invested.
What costs should be included?
Deposit, transaction costs, furnishing, repairs, loan instalments, maintenance fees, vacancy, insurance and tax-related holding costs where relevant.
