What is a good cash-on-cash return on a rental property?
Cash-on-cash return is a year of pre-tax cash flow divided by the cash left in the deal, which on a straight purchase is everything you put in: down payment, closing costs and rehab. If you have $50,000 in and the property clears $4,000 a year after the mortgage, your cash-on-cash return is 8%.
Cash-on-cash is the return on the real money still tied up in a deal, measured against the cash flow it produces in a year. On a straight purchase that money is everything you put in (down payment, closing, and rehab). Unlike cap rate, it does account for your financing, which is why it's the number most investors check first.
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Target ranges
These are BuyBox's default bands. In a BRRRR deal, the refinance can return most of your cash, which shrinks the cash left in and sends cash-on-cash sky-high. If the refinance leaves no cash in the deal at all, there is no base to earn a return on, so the metric stops applying and BuyBox shows a dash instead of a number. Set your own bar in your buy box.