The cash on cash return is an annual measure of income earned by a real estate investor on a property relative to the amount the investor initially spent to purchase it and make it operational. The cash on cash return by city is often used when making any investment property analysis. The difference between the cash on cash return and the cap rate is that with the cash on cash return measure, the method of rental property financing is also taken into consideration.
What Is a Good Cash on Cash Return for Investment Properties?
There is no hard-and-fast rule when it comes to deciding a specific figure that should be considered as a good cash on cash return. However, most investors agree that projected cash on cash return of 8% or higher is generally the ideal figure. However, others believe that even those markets with 3% to 7% cash on cash return are still acceptable and could be worth investing in.
If you’re wondering how to calculate the cash on cash return for residential real estate rental properties, you can use the following cash on cash return formula:
Cash on Cash Return = [Annual Cash Flow Before Tax / Total Cash Investment] x 100%
The cash on cash return is calculated as the annual cash flow before tax divided by the total equity invested and multiplied by 100% (to get the percentage). The figure for the cash flow before tax is calculated on the cash flow projection in real estate. The figure for the total cash invested is the initial equity investment (which is the total purchase price of the property less any loan proceeds and closing costs) plus any additional equity required during the holding period.
Related: What is a Good Cash on Cash Return? A Complete Guide
How Can the Cash on Cash Return by City Help Investors?
The cash on cash return by city is important when evaluating the potential profitability of an investment property. Using this return measure is an excellent way to determine how an investment property in a particular area will perform – helping you decide whether it’s worthwhile to invest in that city or not.
When finding the best location for real estate investing, it’s important to look at the cash on cash return by city to help maximize rental income. If you want to know the right areas to buy an investment property in 2022, we have compiled the top US housing markets with the best cash on cash return for both traditional rentals and Airbnb investment properties.
Best Cities for Cash on Cash Return 2022
Knowing how to achieve good cash on cash return is a crucial part of a sound real estate investment strategy in 2022. As part of their strategy, investors can choose between two types of real estate rental properties: traditional and short term rentals. The final choice depends on the level of risk the investor is willing to take. Below are separate lists of cash and cash return by city for both types of rental properties to help you choose the best option for your real estate investment.
Cash by Cash Return by City for Traditional Rentals
To find the best cities for traditional rental investments in 2022, we’ll take a look at the cash on cash return by city. The figures below were computed by Mashvisor’s cash on cash return calculator.
Here are the 60 most profitable locations for traditional rental properties in 2022:
- Spruce Pine, NC: 9.1%
- Sylacauga, AL: 7.8%
- Espanola, NM: 7.6%
- Owatonna, MN: 7.3%
- Winslow, AZ: 7.2%
- Greenwood, MS: 6.9%
- Emporia, VA: 6.9%
- Mimbres, NM: 6.8%
- Lakeview, OR: 6.8%
- Eight Mile, AL: 6.8%
- Forest Hills, KY: 6.7%
- New Ringgold, PA: 6.7%
- Rotonda West, FL: 6.6%
- Woodburn, IN: 6.5%
- Hobbs, NM: 6.5%
- Dunkirk, IN: 6.5%
- Elkview, WV: 6.4%
- Kansas, OK: 6.4%
- Greers Ferry, AR: 6.4%
- St Gabriel, LA: 6.4%
- Gallipolis, OH: 6.3%
- Fort Madison, IA: 6.2%
- Las Vegas, NM: 6.1%
- Brooksville, KY: 6.1%
- Alma, MI: 6.1%
- Damascus, AR: 6%
- Cushing, OK: 5.9%
- Narrows, VA: 5.9%
- Adelphi, MD: 5.9%
- North Huntingdon, PA: 5.9%
- Stamford, TX: 5.9%
- Newberry, SC: 5.9%
- Doyline, LA: 5.9%
- Spring Valley, MN: 5.8%
- Marietta, OH: 5.8%
- Wolcottville, IN: 5.7%
- Maysville, KY: 5.7%
- Summit, NY: 5.5%
- Princeton, WV: 5.4%
- Pine Hill, NJ: 5.4%
- Suwannee, FL: 5.4%
- Afton, TN: 5.4%
- Duanesburg, NY: 5.3%
- Hinton, OK: 5.2%
- Snowflake, AZ: 5.2%
- Mammoth Spring, AR: 5.1%
- Jacksboro, TX: 5.1%
- Old Forge, PA: 5%
- Godfrey, IL: 5%
- Thermal, CA: 4.9%
- DeQuincy, LA: 4.9%
- Olney, TX: 4.9%
- La Place, LA: 4.9%
- Brackettville, TX: 4.8%
- Rome City, IN: 4.8%
- Richmond, MO: 4.8%
- Pleasantville, NJ: 4.8%
- White Springs, FL: 4.8%
- Durand, MI: 4.8%
- Green Lake, WI: 4.7%
Find the Cash by Cash Return by City Using Mashvisor’s Cash on Cash Return Calculator
Cash on Cash Return by City for Airbnb Rentals
Some real estate investors are making money in real estate by investing in Airbnb rentals. Short term rental property investments have become a viable source of passive income for many investors. To become successful in short term rental investments, it’s important to check the best-performing markets by analyzing the cash on cash return by city.
Here are the 60 best locations for Airbnb in 2022:
- Winslow, AZ: 10%
- Milan, IL: 9.6%
- Huntingdon Valley, PA: 9.6%
- Salem, AL: 9.6%
- Vinton, VA: 9.4%
- Westover, WV: 9.4%
- Parkersburg, WV: 9.3%
- Feasterville Trevose, PA: 9.2%
- Plymouth, NH: 9.2%
- Creve Coeur, IL: 9.1%
- Meadville, PA: 9.1%
- Black River, NY: 9%
- Cuba, MO: 9%
- Florida, NY: 9%
- Owings, MD: 9%
- Springfield, LA: 8.7%
- Watauga, TX: 8.8%
- Bel Aire, KS: 8.8%
- Lancaster, OH: 8.8%
- Fulks Run, VA: 8.8%
- Caledonia, MI:S 8.8%
- Sparks, MD: 8.7%
- Collingswood, NJ: 8.7%
- Cottage Grove, MN: 8.7%
- Orangevale, CA: 8.7%
- Madison Heights, MI: 8.7%
- Dover, OH: 8.7%
- Hillsboro, TX: 8.6%
- Santa Claus, IN: 8.6%
- Berkeley, NJ: 8.6%
- Ridgeland, SC: 8.6%
- Hainesville, LA: 8.6%
- Lake Wylie, SC: 8.6%
- St Robert, MO: 8.5%
- Cave City, KY: 8.5%
- Garfield Heights, OH: 8.5%
- Chittenango, NY: 8.4%
- Tunkhannock, PA: 8.4%
- Merrillville, IN: 8.4%
- Forest Hill, TX: 8.4%
- Newton, NJ: 8.4%
- Ravenna, OH: 8.4%
- Coventry, CT: 8.4%
- Hamtramck, MI: 8.4%
- Worth, IL: 8.3%
- Marysville, WA: 8.2%
- Oak Grove, KY: 8.2%
- Corunna, MI: 8.2%
- Reidville, SC: 8.2%
- West Fargo, ND: 8.2%
- Ledyard, CT: 8.1%
- Pulaski, VA: 8.1%
- Port Wentworth, GA: 8.1%
- Coolidge, AZ: 8.1%
- Wethersfield, CT: 8%
- Lincoln, RI: 7.9%
- Browns Summit, NC: 7.9%
- Parachute, CO: 7.9%
- Greenwood, DE: 7.9%
- Clearlake Oaks, CA: 7.8%
When investing in Airbnb rentals, it’s important to research the short term rental regulations for a particular state and/or city. Knowing the restrictions per state and/or city is essential in helping you adopt the right investment strategy.
For instance, vacation rentals in certain areas do not allow stays for less than 30 days. It means you should consider investing in Airbnb long-term rentals instead. In some markets, short term rentals are permitted only in primary residences. With this kind of restriction, you can opt to either buy a duplex or another small multi-family home, live in one housing unit, or rent out the rest on vacation rental platforms such as Airbnb, HomeAway, or Vrbo.
Analysis of the 2022 Cash on Cash Return by City
- The best 2022 cash on cash return by city for traditional rentals ranges from 4.7% (Green Lake, WI) to 9.1% (Spruce Pine, NC), with a median value of 6% in Damascus, AR.
- Based on the data presented above, the best location for buying a long-term rental property in 2022 is the Green Lake housing market, with a cash on cash return of 9.1%.
- The states with the largest number of top US housing markets for investing in traditional rental properties in 2022 include Texas, New Mexico, Louisiana, and Ohio.
- The best 2022 Airbnb cash on cash return by city covers between 7.8% (Clearlake Oaks, CA) and 10% (Winslow, AZ). The median value is 8.6% in Ridgeland, SC.
- According to Mashvisor data, as of January 2022, the most profitable market for investing in an Airbnb rental property is the Winslow real estate market, with a city average cash on cash return of 10%.
- The states with the largest number of top US housing markets for investing in short term rental properties in 2022 include Michigan, New York, Texas, and Pennsylvania.
- If we look at the low to medium range cash on cash return values of both the traditional and Airbnb rentals, we can say that short term rentals offer higher yields compared to long-term rentals. This is due to the high daily rates and occupancy rates. Since the US tourism industry is slowly starting to open again after the onset of the pandemic, we can expect to see improved demand for vacation rentals.
- For the high range cash on cash return values, there is no significant difference between traditional and Airbnb rentals, though the latter is still slightly higher.
The Best Cash on Cash Return Calculator in 2022
To calculate the cash on cash return accurately, you need to gather the necessary real estate data to find out the potential profitability of the properties that interest you. Here are the important information and estimates that you will need:
- Property’s selling price
- Cash down payment
- Closing fees
- Real estate appraisal
- Home inspection
- Initial repairs
- Monthly mortgage payments
- Property tax
- Property insurance
- Property management
- HOA dues (if applicable)
- Cleaning fees (for Airbnb investment properties)
- Utilities
Calculating the cash on cash return of an investment property involves a lot of work, and it can be tedious, especially for new real estate investors. The good news is there are many software tools available that can help real estate investors make the right decision. One of the most important investing tools is the cash on cash return calculator.
Fortunately, Mashvisor offers an investment property calculator that specifically provides essential information, including the property price, one-time startups costs, recurring monthly expenses, rental income, occupancy rate, cash flow, cash on cash return, and cap rate.
Important Reminder
The cash on cash return by city can help you have a general overview of how profitable a traditional rental investment or Airbnb investment property in a certain location will be. It can help you decide which market to invest in, especially if you consider out of state investing. While this return measure can be very helpful when making investment decisions, you should also consider other important factors, such as the price to rent ratio, Airbnb daily rate, average monthly rentals, and the occupancy rate.
While some of the cities included in these lists have cash on cash return rates below the recommended rate of 8% or higher, investors should know that these are just city-level averages, and these numbers should not discourage them from investing. The best neighborhoods for real estate investing in each of these areas offer significantly higher rates of return. Use our Mashvisor heatmap analysis tool to quickly identify the neighborhoods with the highest cash on cash return for traditional and Airbnb rentals.
Start Investing in Rental Properties with the Help of Mashvisor
If you’re ready to invest in rental properties but are not sure which areas to invest in, we can help you make an informed decision based on our in-depth real estate market data analysis. Mashvisor’s database contains hundreds of thousands of properties, as well as complete real estate analytics to help you get started with your rental investment.
To search for the right investment property, just type in a city or your preferred neighborhood to get a quick overview of the houses for sale in that area. Click on the property that interests you to find a more detailed analysis of the average rental income, cash on cash return, median home price, cash flow, price to rent ratio, occupancy rate, and more. Specifically, you can determine the cash and cash return by city so you’ll realize a positive cash flow and a good return on investment.
Use our Mashvisor tools to help you find the right property for your investment goals. Our tools also provide predictive analytics, comparable rental listings, and insights. We can also help you determine which real estate investment strategy would work best in a particular location. Click here to start searching for the best investment properties in your chosen city and neighborhood.