What Is a Good Cash-on-Cash Return on a Rental?
Everyone wants the magic number. The truth is that a "good" cash-on-cash return is the one that beats your alternatives after accounting for risk — and that moves with the market, your leverage, and what you're trying to build.
A working range
In many US markets, investors treat 8–12% cash-on-cash as solid for a stabilized long-term rental, with higher figures expected in cheaper or higher-risk markets and lower figures accepted in appreciation-heavy ones. Treat that as a starting frame, not a rule.
Context beats benchmarks. A 6% cash-on-cash return in a market appreciating steadily, with strong principal paydown, can build more wealth than a 12% return in a stagnant one. Cash-on-cash is a snapshot, not the whole film.
Three things that move the number
- Leverage. More borrowing can lift cash-on-cash — while raising risk and lowering your cushion. A high return built on thin coverage is fragile.
- Your baseline. If safe, passive alternatives yield 4–5%, a rental has to clear that plus a premium for the work and risk. When baseline rates rise, your target should too.
- Honesty of inputs. Most "great" cash-on-cash numbers quietly ignore vacancy, maintenance and CapEx reserves. Put those back in and the real figure appears.
The better question
Instead of "is this a good return?" ask "is this a good return for this risk, in this market, versus what else I could do with the cash?" That's the comparison that actually protects you.
Screen deals in seconds. The EYRIE Cap Rate Calculator gives you cap rate, NOI, cash flow and DSCR instantly, so you can judge cash-on-cash on real numbers. See it on Etsy →