See what your cash actually earns — not just what the property earns.
Cash-on-cash return — CoC for short — answers the most personal question in real estate: what is the money I actually put in earning? Take your annual cash flow (rent minus expenses minus the mortgage payment, times twelve) and divide it by the cash you invested — down payment, closing costs, and any repairs. The result is a yield on your dollars, the number you can honestly compare against what those same dollars would earn elsewhere.
Cap rate — capitalization rate — deliberately ignores financing: it measures what the building earns as if you paid all cash. Cash-on-cash does the opposite. It measures what you earn after the loan takes its bite. That's why leverage changes it so dramatically: borrow more and your cash invested shrinks while the mortgage payment grows — the same property can show a modest cap rate and a strong CoC, or a decent cap rate and a negative CoC, purely on loan terms.
CoC is a cash-flow snapshot, not the whole return. It ignores appreciation, loan paydown (the equity your tenant builds for you each month), and taxes. A deal with a thin CoC can still build wealth — and a fat CoC can hide a building in a declining market. That's why the number is a starting gate, not a verdict. The full Rentals analyzer runs the rest: real expense modeling, vacancy, stress tests, and a verdict you can defend.