What Cash on Cash Return for a Rental Property Can You Expect in 2018?

One of the most important return on investment (ROI) metrics is the cash on cash return. Continue reading this blog if you’re interested in finding the cash on cash return for a rental property in 2018.

What Is Cash on Cash Return?

Many beginner real estate investors tend to assume that cash on cash return (CoC return) is the same as return on investment (ROI), but it’s not. Simply put, the CoC return is a rate of return that represents the actual cash income earned on the cash invested in the property. ROI calculates the total return on an investment, whereas the CoC return only shows the actual cash return.

The difference in these two ratios comes into play when you’re buying an investment property which involves long-term debt borrowing. Cash on cash return only calculates the return yielded by the cash you invested- not including any money borrowed as debt. Therefore, this metric gives you a better idea of the investment’s actual performance.

How to Calculate Cash on Cash Return

The cash on cash return formula is quite simple at first glance:

Cash on Cash Return = Annual Pre-Tax Cash Flow/ Actual Cash Invested

Things get a bit more complex when you start to break-down the cash on cash return calculation. Its two variables, annual pre-tax cash flow and actual cash invested, are the ones that could be a bit tricky. The fact that it uses ‘pre-tax cash flow’ means that taxes haven’t been factored in. Actual returns of an investment could vary based on the unique tax situation of each real estate investor. That’s one thing to keep in mind. When it comes to actual cash invested, there are also a couple of things to consider. We have multiple blogs covering the CoC return. To know the dos and don’ts when it comes to calculating CoC return, check out the following links:

If you just came back from reading those blogs… take a second to breathe. We know how complicated things can get in real estate investing. Finding important metrics like the cash on cash return for a rental property and the cap rate could be quite stressful. Luckily, you’re in the right place. Mashvisor is the king when it comes to data and investment property analysis. We’re here to make your life easier. From traditional to Airbnb investments, we’ve got you covered in any real estate investment decision you might need to make.

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When you sign up for our services, you can find out immediately what kind of returns a property will provide. Our investment property calculator uses predictive analytics and historical data to provide you with the best quality information! Be confident in your next real estate investment. Find out the cash on cash return for a rental property in any neighborhood! To start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.

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So…What Is a Good Cash on Cash Return for a Rental Property?

The textbook answer to that question is 8-12%. But we all know that, when it comes to real estate investing, text-book answers won’t cut it. The cash on cash return is a simple metric. Keep in mind, you should never rely on a single metric to assess a property’s performance. But, because of the common nature of CoC return in a real estate market analysis, we’re going to dive in with some thoughts. When you’re searching for the right cash on cash return for a rental property, everything about the specific property is important.

The cash on cash return for a rental property could vary depending on the property type (single-family home, condominium, multifamily, commercial, etc.) and its location. You can use Mashvisor’s heatmap to quickly and easily find income properties in any neighborhood. Based on the criteria you select, the heatmap will highlight the properties in the areas that most closely match your criteria. So, for example, if you were interested in finding the highest cash on cash return for a rental property, just let the heatmap know and you’ll have your answer in no time!

What Cash on Cash Return for a Rental Property to Expect in 2018

Here’s a list of some of the most current cash on cash return for a rental property in the top performing neighborhoods in the US- for both traditional and Airbnb rental properties.

Nashville, TN- Germantown: Airbnb CoC Return: 12.01% Traditional CoC Return: 5.21%
Nashville, TN- Melrose: Airbnb CoC Return: 8.03% Traditional CoC Return: 0.9%
Baltimore, MD- Old Town: Airbnb CoC Return: 10.94% Traditional CoC Return: 6.99%
Baltimore, MD- Heritage Crossing: Airbnb CoC Return: 7.86% Traditional CoC Return: 6.64%
Orlando, FL- Millenia: Airbnb CoC Return: 8.76% Traditional CoC Return: 3.44%
San Francisco, CA- South of Market: Airbnb CoC Return: 3.56% Traditional CoC Return: 2.64%
Tampa, FL- Historic Ybor: Airbnb CoC Return: 4.47% Traditional CoC Return: 2.65%
Chicago, IL- West Loop Gate: Airbnb CoC Return: 2.28% Traditional CoC Return: 1.19%
New York, NY- Garment District: Airbnb CoC Return: 5.19% Traditional CoC Return: 4.03%
Anaheim, CA- Southwest Anaheim: Airbnb CoC Return: 6.27% Traditional CoC Return: 1.85%
Seattle, WA- Uptown: Airbnb CoC Return: 4.18% Traditional CoC Return: 1.21%
San Antonio, TX- Nevada Street: Airbnb CoC Return: 5.01% Traditional CoC Return: 0.64%
New Orleans, LA- Tulane-Gravier: Airbnb CoC Return: 6.99% Traditional CoC Return: 1.43%

These values are provided by Mashvisor’s real estate investment calculator.

Summing It All Up- Cash on Cash Return for a Rental Property

You know what cash on cash return is, you know how to calculate it, how Mashvisor can help, and what to expect in 2018. The real estate market is ever-changing, and to make the best real estate investments, you need a reliable source. We are that reliable source. Our many tools, like the investment property calculator, allow us to provide you with all the real estate analytics you’ll need on one platform. Make business intelligent investments by conducting your investment analysis or comparative market analysis with us. All this and so much more when you sign up for Mashvisor! To stay updated on the real estate market, make sure to check out our blogs.

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