Cash-on-Cash Return

Frequently asked questions

What is a good cash-on-cash return for a rental property?

Most experienced investors target a cash-on-cash return of 8 to 12% for leveraged residential rental properties. In Dubai, well-structured buy-to-let investments can achieve 7 to 10% CoC ROI given relatively low mortgage rates and high gross yields. In the US, a CoC return above 8% is considered strong for a single-family rental. Returns below 5% suggest the leverage is not adding enough value to justify the mortgage risk.

How do you calculate cash-on-cash return?

Divide your annual pre-tax cash flow by total cash invested and multiply by 100. Annual cash flow equals rental income minus all expenses minus EMI payments. Total cash invested includes down payment, closing costs, and any renovation spend. For example: AED 60,000 annual cash flow on AED 600,000 total cash invested gives a 10% cash-on-cash return. IONROI calculates this automatically using your recorded payments and down payment amount.

What is the difference between cash-on-cash return and ROI?

Cash-on-cash return measures only the annual cash income against cash invested, ignoring capital appreciation. Total ROI can include unrealized gains from property value increases. CoC return is the better metric for evaluating current income performance, while total ROI gives a fuller picture of wealth creation. For a leveraged investor, CoC return is often the primary day-to-day metric because it reflects actual cash in hand.

Does cash-on-cash return include mortgage principal repayment?

It depends on your calculation method. The standard approach uses pre-tax cash flow after all debt service (both interest and principal), so EMI payments reduce your cash flow and therefore your CoC return. Some investors add back principal repayment to show the "economic" return since principal builds equity. IONROI uses the standard approach of deducting full EMI payments, giving you a conservative and accurate cash yield figure.