What Is a Good Cash-on-Cash Return? (Benchmarks by Property Type)
Alex WrightAsk ten investors what a "good" Cash-on-Cash Return is and you'll get ten answers. That's because the right target depends on your strategy, market, risk tolerance, and what alternatives you have for your capital. But there are concrete benchmarks worth knowing.
Understanding what a good cash-on-cash return is helps investors decide whether a rental property deal is worth pursuing.
What Is a Good Cash-on-Cash Return?
Here are typical benchmarks for rental property investors:
| Strategy | Typical Cash-on-Cash Return |
|---|---|
| Conservative buy-and-hold | 6–8% |
| Balanced investment | 8–12% |
| Value-add / higher risk | 12–20%+ |
Most investors target 8–12% cash-on-cash return when evaluating rental property deals. To see how this metric fits into a full deal analysis, see our guide on how to analyze a rental property, or crunch the numbers yourself with the Rental Property Calculator.
The Short Answer
Cash-on-Cash Benchmarks by Strategy
| Strategy | Target CoC | Realistic Range | Context |
|---|---|---|---|
| Buy-and-hold (Class A/B) | 6–8% | 4–8% | Lower CoC, but strong appreciation and low vacancy |
| Buy-and-hold (Class C) | 8–12% | 7–14% | Higher CoC, more management intensity and risk |
| Value-add / BRRRR | 12–20%+ | 10–25% | Higher returns from forced appreciation, then refinance |
| Short-term rental (Airbnb) | 10–18% | 6–22% | Wide range; highly market and regulation dependent |
| Commercial (small multi) | 8–10% | 6–12% | 5+ units; economies of scale, different financing |
| New construction rental | 6–9% | 5–10% | Premium asset, low maintenance, but high basis |
Why "Higher Is Better" Is Wrong
A 20% cash-on-cash return sounds incredible. But returns always correlate with risk. Here's what high CoC often signals:
- Class D neighborhood — High rents relative to price because the asset is risky. Vacancy, vandalism, and delinquency eat into that paper return.
- Deferred maintenance — The property is cheap because it needs $50K in work. The CoC calculation doesn't include that until you account for it.
- Unsustainable rents — Seller inflated rents above market to juice the numbers pre-sale.
- Seller financing gimmick — 0% down or interest-only seller financing can manufacture any CoC number. The risk is in the balloon payment.
How Market Conditions Affect Cash-on-Cash
Cash-on-cash is heavily affected by interest rates and market pricing. Here's the same property analyzed under different rate environments:
| Rate Environment | Mortgage Rate | Monthly Payment | Annual Cash Flow | CoC Return |
|---|---|---|---|---|
| Low rates (2021) | 3.5% | $1,347 | $19,636 | 16.4% |
| Mid rates (2024) | 6.5% | $1,896 | $13,048 | 10.9% |
| Current (2026) | 7.0% | $1,995 | $11,860 | 9.9% |
| High rates scenario | 8.0% | $2,201 | $9,388 | 7.8% |
Same property, same price, same NOI — but CoC drops by half as rates double. This is why comparing your deals to 2020-era YouTube case studies is misleading. Evaluate against current conditions.
Cash-on-Cash by Property Type
| Property Type | Typical CoC Range | Why |
|---|---|---|
| Single-family rental | 5–10% | Lower yields, but liquid and easy to manage |
| Small multifamily (2–4) | 7–12% | Sweet spot for individual investors |
| Apartment (5–20 units) | 8–12% | Economies of scale, commercial financing |
| Self-storage | 8–14% | Operationally intensive, high per-unit margins |
| Retail / NNN | 6–9% | Passive, but tenant concentration risk |
| Short-term rental | 8–22% | High ceiling, high management burden, regulatory risk |
Cash-on-Cash Return Formula
Example: $12,000 annual cash flow ÷ $120,000 total cash invested = 10% cash-on-cash return.
The CoC Calculation Most People Get Wrong
The formula is simple. The inputs are where people mess up:
What counts as "total cash invested"?
- Down payment
- Closing costs (both buyer-side and any seller credits you didn't receive)
- Rehab / renovation costs
- Furnishing costs (for STR)
- Any reserves you had to escrow at closing
What counts as "annual cash flow"?
Cash flow = Net Operating Income (NOI) minus annual debt service. It should include CapEx reserves and vacancy. If you're not reserving for repairs, your "cash flow" is borrowing from the future.
Example: Is This Deal Worth It?
Duplex — $320,000 purchase, 25% down, 7.0% rate / 30 years. Gross rent $3,400/mo, 7% vacancy, $14,800 annual expenses.
DealForge Analysis — Duplex
AcceptableNOI
$23,096
Annual Debt Service
$19,152
Annual Cash Flow
$3,944
Total Cash Invested
$89,000
$80K down + $9K closing
Cash-on-Cash
4.43%
Cap Rate
7.22%
At 4.43% CoC, this property barely beats a municipal bond. The math suggests either: negotiate a lower price, find higher rents, or invest elsewhere.
At $280,000 (12.5% discount), CoC jumps to 7.8% — more reasonable for the risk. This is how CoC guides your offer price. See the rental property analysis guide for the full framework.
Cash-on-Cash Return for Airbnb & Short-Term Rentals
Short-term rental (STR) investors typically target a higher cash-on-cash return than traditional landlords — and for good reason. Airbnb properties carry higher expenses (35–50% of gross vs 15–25% for long-term rentals), more management intensity, and regulatory risk that can wipe out income overnight.
| STR Metric | Target | Why It Matters |
|---|---|---|
| Cash-on-Cash Return | 10–18% | Must exceed LTR targets to justify added risk and effort |
| Breakeven Occupancy | < 55% | If you need 65%+ occupancy to break even, the deal is fragile |
| Revenue vs. LTR | 1.5–3× | Below 1.5× long-term rent, STR rarely justifies the extra work |
| Operating Expenses | 35–50% of gross | Cleaning, management (15–25%), utilities, supplies, insurance |
The wide CoC range (6–22%) for STRs reflects how sensitive returns are to occupancy and nightly rate. A beach house at 75% occupancy might generate 18% CoC, while the same property at 55% occupancy could drop below 6%. Always stress-test your numbers using an Airbnb investment calculator before committing capital.
For a full walkthrough of how STR analysis differs from long-term rentals, see How to Analyze an Airbnb Property Investment or compare both strategies in Airbnb vs Long-Term Rental: Which Strategy Wins?
When Cash-on-Cash Alone Isn't Enough
CoC is a Year 1 metric. It doesn't capture:
- Appreciation — If the property gains 3% per year, your total return is much higher than CoC suggests.
- Mortgage paydown — Your tenant is paying down your loan principal. That's wealth building that CoC ignores.
- Tax benefits — Depreciation offsets income. CoC is pre-tax.
- Equity on sale — IRR captures all cash flows including the eventual sale, making it the best total-return metric.
For more on how these metrics complement each other, read Cap Rate vs Cash-on-Cash Return Explained.
How DealForge Would Analyze This
DealForge shows CoC prominently in the metrics panel for every real estate deal. The platform also:
- Calculates IRR and equity multiple for a full-picture return
- Runs sensitivity analysis on purchase price — "what CoC do I get at $280K vs $300K vs $320K?"
- Uses the Max Offer Calculator to find the price that hits your target CoC
- Projects CoC over a 5–10 year hold with rent growth assumptions
Explore the demo to see these metrics in action, or create a free account to analyze your own deals.
▼ Check your deal's cash-on-cash return
Deal Inputs
Results
Cash-on-Cash Return
6.71%
Moderate — may be acceptable for appreciation plays
Cap Rate
7.80%
Free — includes projections, scenarios & lender reports
Ready to run the numbers on your own deal?
Try the Cash-on-Cash Calculator →FAQ
Is a 5% cash-on-cash return good?
A 5% cash-on-cash return is generally considered low for rental property. Many investors target at least 8–12% to compensate for the risk, management effort, and illiquidity compared to passive alternatives like Treasury bonds or REITs.
Is a 10% cash-on-cash return good?
Yes. A 10% cash-on-cash return is widely considered a strong return for buy-and-hold rental property, especially in the current rate environment.
Why is cash-on-cash return higher than cap rate?
Cash-on-cash return includes the effect of leverage (financing). When you finance a property, you're investing less of your own cash while still capturing much of the property's income, which amplifies the return on your invested capital.
What is the difference between cash-on-cash return and ROI?
Cash-on-cash return measures annual cash flow relative to cash invested.ROI is broader — it can include appreciation, mortgage paydown, and tax benefits. CoC is a Year 1 cash-flow metric; ROI captures total returns over the full hold period.
Bottom Line
A "good" cash-on-cash return in 2026 is 8–12% for most buy-and-hold strategies. Below 6% rarely justifies the risk unless you're buying for appreciation. Above 15%, verify that the numbers are real and the risk is priced in. And always calculate CoC using total cash invested — not just your down payment.
Related reading: How to Analyze a Rental Property · Cap Rate vs Cash-on-Cash Return Explained · How to Analyze an Airbnb Property Investment · Rental Property Deal Analysis Example · What DSCR Do Banks Require · Rental Property Analysis: Full Breakdown · Rental Property Calculator · Airbnb Investment Calculator
Alex Wright
Real Estate Investor & Founder of DealForge
Alex Wright is a real estate investor and full-stack engineer focused on helping investors make better decisions through clearer deal analysis. After six years as a realtor and more than a decade investing in real estate, he built DealForge to close the gap between how deals are marketed and how they actually perform.
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