Any real estate investor worth his or her salt knows how important good cash on cash return rate is. Whether it’s traditional cash on cash return or short-term rental cash on cash return, investors should be aware of a property’s potential rental income if they expect to make a solid return on their investment.
Watch our video below to find out the top locations for investing in traditional rental properties in 2022 for the highest return on investment:
In this article, we will discuss the importance of cash on cash return and recommend the top rental markets where an investor is most likely to find some of the best cash on cash returns in the US.
The Best Locations for Traditional Cash on Cash Return in 2022
If you’re a real estate investor and you would like to find out how profitable a property is, understand that certain metrics are used to determine a property’s income-generating potential. The main goal for an investor is to get a good return on investment. Breaking even is not enough. No sane investor would invest a huge amount of money just to break even. Making a profit is the number one goal of getting into real estate investing.
That being said, knowing how to determine the possible investment returns will help prospective investors make the wisest decisions. This is where understanding the concept of cash on cash return gives investors a better idea of how to make the right computations to map out the right real estate investment strategy.
What Does “Cash on Cash Return” Mean in Real Estate?
CoC return is one of several metrics investors use to determine a property’s profitability. It is used to measure a property’s annual return relative to the money initially invested. It is calculated by dividing the investment property’s pre-tax cash inflows by the investor’s pre-tax cash outflows. In simpler terms, the net cash flow is divided by the total cash the investor has made.
A cash on cash return essentially tells investors how much money is earned back annually from their out-of-pocket investment.
While there are plenty of investment property return calculators available online, Mashvisor has one of the best cash on cash return calculators used by tens of thousands of investors. It not only helps investors figure out their short-term or traditional cash on cash return but it also allows them to search for the property right up their alley in the best rental markets all across the country.
Go to the site and check out the cash on cash calculator and other Mashvisor tools and see why real estate investors are confident in their investment decisions by using the real estate marketplace platform.
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What Is It Not?
Newbie investors and those who are not well-versed in real estate investments might confuse cash on cash returns from other similar terms. We’ve already defined what it is earlier. To ensure that you, our dear readers, don’t get caught up in the same confusion, we have also defined what cash on cash return is not.
Cash on Cash Return Is Not a Return on Investment
If you’re new to the rental property game, you might hear other investors use the terms cash on cash return and return on investment interchangeably. While they may seem very similar, they are not one and the same. While cash on cash return looks at a potential return based on the out-of-pocket investment made, a return on income — or ROI — looks at the investment as a whole, including loans used to finance the property’s purchase.
Cash on Cash Return Is Not a Net Operating Income
A cash on cash return is different from a net operating income, or NOI. The latter is computed differently from the former with the main difference being that cash on cash return takes into account debt services while an NOI does not. This principle is applied to both short-term rental and traditional cash on cash return computations.
Why Is It Important to a Real Estate Investor?
Just to drive home the point, cash on cash return is one of the most useful metrics in identifying the most profitable properties for investors to put their money in. Understand that each investor has different investment goals and financial capabilities. Using this metric to determine how promising a property is allows investors to have an idea of how well a rental property will perform. Ultimately, the decision to invest lies in how promising the property is for the long haul.
Regardless of whether an investor decides to have the property rented traditionally or as a vacation rental, knowing its traditional cash on cash return as well as the short-term return can point investors in the right direction. It also helps them figure out how to go about their financing. A cash on cash return formula can show investors which financing options to take to maximize their annual returns.
What Makes for a Good Cash on Cash Return for Real Estate Investors?
Making money in real estate rental properties involves two main categories: traditional and short-term rentals. Some investors prefer to play it safe and go the traditional way while others opt to go the vacation home rental route. The choice between the two will largely depend on how comfortable the investor is in taking risks.
While the cash on cash return rate is affected by different factors depending on the location, most experts agree that anywhere between 8% to 12% makes a property a worthwhile investment. However, properties that offer these numbers are very hard to come by. Some would argue that getting at least 3% cash on cash return is already acceptable in several markets.
While short-term rentals are more popular and have great income-generating potential, most traditional rental property owners take the long-term route because of the stability it provides. Unlike vacation rentals, they can look forward to regular monthly payments for a specific period — in most cases, annually. There is, however, the risk of ending up with a bad tenant which somehow messes up their initial traditional cash on cash return calculations. But, on the other hand, if they do end up with a tenant who’s a good property steward and is a prompt payer, they are assured of hitting that traditional cash on cash return rate.
If you’re considering making a few real estate investments to use as long-term rental properties, you should also factor in how landlord-friendly a market is. More than generating a positive cash flow and getting good traditional cash on cash return, having the law on your side can make a long-term rental business a more pleasant experience.
30 of the Best Cities in the US for Real Estate Investors to Get a Good Traditional Cash on Cash Return
Before we go right into our list of the best rental markets to get remarkable returns, let’s take a look at how the factors we used to determine the places included in this list:
- Median property price. This is the middle point of the prices of all the properties listed in a specific market. This means that half of the houses sold are cheaper while the other half is more expensive. It is a better and more accurate way to look at house prices than looking at average house prices.
- Average price per square foot. This shows you the average cost of a property is worth per square foot
- Days on market. A low average number means that a market is strong and favors sellers. On the other hand, a market with a high average DOM is a sign of a weak market which is beneficial for buyers.
- Number of rental listings. This indicates the number of houses that are marketed and tagged as active listings.
- Monthly rental income. This is the average monthly traditional rental income in a given market. This gives an investor an idea of how much he or she can have the property rented out. This number is drawn using real estate comps.
- Cash on cash return rate. The amount of potential annual return relative to the initial out-of-pocket expense of the investor.
- Price-to-rent ratio. This is the ratio of property prices to annual rental rates in a given location. It tells investors and home buyers whether it’s more affordable for people to buy a property or just rent a house in a certain market.
- Walk Score. This helps determine how convenient a location is to access goods and services without owning a car. The higher the score, the more convenient it is to do errands on foot.
On that note, here are the top 30 locations that offer the best cash on cash return for traditional rental properties:
1. Camden, NJ
- Traditional Cash on Cash Return: 7.13%
- Median Property Price: $127,266
- Average Price per Square Foot: $108
- Days on Market: 63
- Traditional Rental Listings: 159
- Traditional Rental Income: $1,262
- Price to Rent Ratio: 8 (low)
- Walk Score: 61
2. Chester, PA
- Traditional Cash on Cash Return: 6.34%
- Median Property Price: $130,118
- Average Price per Square Foot: $97
- Days on Market: 90
- Traditional Rental Listings: 199
- Traditional Rental Income: $1,133
- Price to Rent Ratio: 10 (low)
- Walk Score: 66
3. South Fulton, GA
- Traditional Cash on Cash Return: 4.82%
- Median Property Price: $239,470
- Average Price per Square Foot: $143
- Days on Market: 27
- Traditional Rental Listings: 127
- Traditional Rental Income: $1,494
- Price to Rent Ratio: 13 (low)
- Walk Score: 27
4. Ventnor City, NJ
- Traditional Cash on Cash Return: 4.73%
- Median Property Price: $386,670
- Average Price per Square Foot: $200
- Days on Market: 107
- Traditional Rental Listings: 183
- Traditional Rental Income: $2,564
- Price to Rent Ratio: 13 (low)
- Walk Score: 60
5. Margate, FL
- Traditional Cash on Cash Return: 4.39%
- Median Property Price: $225,054
- Average Price per Square Foot: $187
- Days on Market: 61
- Traditional Rental Listings: 214
- Traditional Rental Income: $1.582
- Price to Rent Ratio: 112 (low)
- Walk Score: 69
6. Odessa, TX
- Traditional Cash on Cash Return: 4.26%
- Median Property Price: $287,979
- Average Price per Square Foot: $142
- Days on Market: 140
- Traditional Rental Listings: 404
- Traditional Rental Income: $1,669
- Price to Rent Ratio: 14 (low)
- Walk Score: 53
7. Dearborn Heights, MI
- Traditional Cash on Cash Return: 4.18%
- Median Property Price: $235,407
- Average Price per Square Foot: $164
- Days on Market: 54
- Traditional Rental Listings: 242
- Traditional Rental Income: $1,365
- Price to Rent Ratio: 14 (low)
- Walk Score: 60
8. Palm Desert, CA
- Traditional Cash on Cash Return: 4.08%
- Median Property Price: $718,083
- Average Price per Square Foot: $337
- Days on Market: 80
- Traditional Rental Listings: 294
- Traditional Rental Income: $3,621
- Price to Rent Ratio: 17 (medium)
- Walk Score: 65
9. Schaumburg, IL
- Traditional Cash on Cash Return: 4.05%
- Median Property Price: $231,410
- Average Price per Square Foot: $177
- Days on Market: 52
- Traditional Rental Listings: 413
- Traditional Rental Income: $1,630
- Price to Rent Ratio: 12 (low)
- Walk Score: 44
10. Jensen Beach, FL
- Traditional Cash on Cash Return: 4.04%
- Median Property Price: $671,681
- Average Price per Square Foot: $407
- Days on Market: Data not available
- Traditional Rental Listings: 174
- Traditional Rental Income: $2,763
- Price to Rent Ratio: 20 (high)
- Walk Score: 24
11. Warren, MI
- Traditional Cash on Cash Return: 4.04%
- Median Property Price: $183,177
- Average Price per Square Foot: $145
- Days on Market: Data not available
- Traditional Rental Listings: 169
- Traditional Rental Income: $1,104
- Price to Rent Ratio: 14 (low)
- Walk Score: 39
12. Miami Gardens, FL
- Traditional Cash on Cash Return: 4.01%
- Median Property Price: $323,657
- Average Price per Square Foot: $230
- Days on Market: Data not available
- Traditional Rental Listings: 281
- Traditional Rental Income: $1,903
- Price to Rent Ratio: 14 (low)
- Walk Score: 34
13. Stone Mountain, GA
- Traditional Cash on Cash Return: 3.94%
- Median Property Price: $259,619
- Average Price per Square Foot: $152
- Days on Market: 56
- Traditional Rental Listings: 123
- Traditional Rental Income: $1,461
- Price to Rent Ratio: 15 (low)
- Walk Score: 57
14. Warner Robins, GA
- Traditional Cash on Cash Return: 3.90%
- Median Property Price: $216,044
- Average Price per Square Foot: $120
- Days on Market: 72
- Traditional Rental Listings: 214
- Traditional Rental Income: $1,198
- Price to Rent Ratio: 15 (medium)
- Walk Score: 45
15. Burlington, NJ
- Traditional Cash on Cash Return: 3.87%
- Median Property Price: $254,050
- Average Price per Square Foot: $167
- Days on Market: 53
- Traditional Rental Listings: 336
- Traditional Rental Income: $1,551
- Price to Rent Ratio: 14 (low)
- Walk Score: 73
16. Silver Spring, MD
- Traditional Cash on Cash Return: 3.85%
- Median Property Price: $395,731
- Average Price per Square Foot: $292
- Days on Market: 64
- Traditional Rental Listings: 581
- Traditional Rental Income: $1,956
- Price to Rent Ratio: 17 (medium)
- Walk Score: 99
17. Royal Palm Beach, FL
- Traditional Cash on Cash Return: 3.79%
- Median Property Price: $410,605
- Average Price per Square Foot: $231
- Days on Market: 45
- Traditional Rental Listings: 162
- Traditional Rental Income: $2,234
- Price to Rent Ratio: 15 (medium)
- Walk Score: 56
18. Indio, CA
- Traditional Cash on Cash Return: 3.78%
- Median Property Price: $604,065
- Average Price per Square Foot: $289
- Days on Market: 86
- Traditional Rental Listings: 131
- Traditional Rental Income: $3,007
- Price to Rent Ratio: 17 (medium)
- Walk Score: 69
19. Glen Burnie, MD
- Traditional Cash on Cash Return: 3.74%
- Median Property Price: $389,148
- Average Price per Square Foot: $263.46
- Days on Market: 68
- Traditional Rental Listings: 193
- Traditional Rental Income: $1,956
- Price to Rent Ratio: 17 (medium)
- Walk Score: 84
20. Palm Bay, FL
- Traditional Cash on Cash Return: 3.72%
- Median Property Price: $311,147
- Average Price per Square Foot: $178
- Days on Market: 84
- Traditional Rental Listings: 351
- Traditional Rental Income: $1,589
- Price to Rent Ratio: 16 (medium)
- Walk Score: 45
21. Port Charlotte, FL
- Traditional Cash on Cash Return: 3.71%
- Median Property Price: $454,182
- Average Price per Square Foot: $245
- Days on Market: 91
- Traditional Rental Listings: 166
- Traditional Rental Income: $1,952
- Price to Rent Ratio: 19 (medium)
- Walk Score: 53
22. Fayetteville, NC
- Traditional Cash on Cash Return: 3.71%
- Median Property Price: $232,470
- Average Price per Square Foot: $112.07
- Days on Market: 80
- Traditional Rental Listings: 2,442
- Traditional Rental Income: $1,184
- Price to Rent Ratio: 16 (medium)
- Walk Score: 26
23. Vero Beach, FL
- Traditional Cash on Cash Return: 3.7%
- Median Property Price: $788,312
- Average Price per Square Foot: $284
- Days on Market: 93
- Traditional Rental Listings: 762
- Traditional Rental Income: $2,259
- Price to Rent Ratio: 29 (high)
- Walk Score: 78
24. Rockville, MO
- Traditional Cash on Cash Return: 3.67%
- Median Property Price: $473.122
- Average Price per Square Foot: $300
- Days on Market: 75
- Traditional Rental Listings: 516
- Traditional Rental Income: $2,322
- Price to Rent Ratio: 17 (medium)
- Walk Score: 48
25. Lake Worth, FL
- Traditional Cash on Cash Return: 3.62%
- Median Property Price: $394,559
- Average Price per Square Foot: $271
- Days on Market: 46
- Traditional Rental Listings: 640
- Traditional Rental Income: $1,899
- Price to Rent Ratio: 17 (medium)
- Walk Score: 48
26. Katy, TX
- Traditional Cash on Cash Return: 3.62%
- Median Property Price: $296,483
- Average Price per Square Foot: $140
- Days on Market: 17
- Traditional Rental Listings: 270
- Traditional Rental Income: $1,864
- Price to Rent Ratio: 13 (low)
- Walk Score: 51
27. Falls Church, VA
- Traditional Cash on Cash Return: 3.62%
- Median Property Price: $467,834
- Average Price per Square Foot: $302
- Days on Market: 79
- Traditional Rental Listings: 686
- Traditional Rental Income: $2,142
- Price to Rent Ratio: 18 (medium)
- Walk Score: 38.83
28. Lauderhill, FL
- Traditional Cash on Cash Return: 3.61%
- Median Property Price: $182,909
- Average Price per Square Foot: $150
- Days on Market: 90
- Traditional Rental Listings: 327
- Traditional Rental Income: $1,360
- Price to Rent Ratio: 11 (low)
- Walk Score: 39
29. Syracuse, NY
- Traditional Cash on Cash Return: 3.61%
- Median Property Price: $188,279
- Average Price per Square Foot: $112
- Days on Market: 86
- Traditional Rental Listings: 204
- Traditional Rental Income: $1,223
- Price to Rent Ratio: 13 (low)
- Walk Score: 52
30. Bradenton, FL
- Traditional Cash on Cash Return: 3.60%
- Median Property Price: $491,102
- Average Price per Square Foot: $264
- Days on Market: 40
- Traditional Rental Listings: 628
- Traditional Rental Income: $1,976
- Price to Rent Ratio: 21 (high)
- Walk Score: 47
No investor puts money in a property just to break even. The main reason why people invest is to supplement their income and generate wealth passively. Traditional rental property is one of the stablest ways real estate investors can generate passive income. Identifying the most ideal places where one can make decent traditional cash on cash return and investing in them can help investors sleep soundly at night.
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