Why there is no single "good" number
New investors search for a magic CoC threshold, something like "10% is good, anything less is bad." That framing causes more bad decisions than it prevents. A 6% CoC on a B class duplex in a market appreciating at 5% annually may outperform a 14% CoC single family in a declining D class neighborhood where you lose a month of rent to turnover twice a year.
Context determines what "good" means. Your strategy, the neighborhood class, your financing terms, your risk tolerance, and the other returns the deal produces (equity, appreciation, tax benefits) all factor in. The tables below give you ranges to work with, not hard rules.
CoC benchmarks by investment strategy
| Strategy | Target CoC Range | Why |
|---|---|---|
| Buy and hold | 8% to 12% | Stable cash flow, long hold period, moderate risk. The bread and butter of rental investing. |
| BRRR | 15% to 25%+ | After refinance, your remaining cash in the deal drops significantly, pushing CoC up. Some deals hit infinite CoC when you pull 100% of your capital out. |
| Section 8 | 10% to 15% | Government guaranteed rent reduces vacancy risk. Rents often sit at or above market rate. Lower turnover in many markets. |
| Turnkey | 5% to 8% | You pay a premium for a fully renovated, tenanted, managed property. Lower CoC is the trade off for zero sweat equity. |
| Value add multifamily | 12% to 18% | Renovate units, raise rents, reduce expenses. CoC improves as the value add plan executes over 12 to 24 months. |
When a BRRR deal returns 100% of your invested capital on refinance, the denominator in the CoC formula drops to zero. Mathematically, the return is infinite. In practice, this means every dollar of cash flow is pure profit on zero remaining capital. This is why BRRR investors care about capital velocity as much as CoC percentage.
CoC benchmarks by market class
Neighborhood class affects both the numerator (rental income minus expenses) and the denominator (purchase price and rehab). Higher class properties cost more per dollar of rent, which compresses CoC. Lower class properties produce higher CoC on paper but carry risks that erode actual returns.
| Market Class | Typical CoC | Risk Profile |
|---|---|---|
| A class | 4% to 7% | Premium neighborhoods, newer construction, high quality tenants. Low vacancy, low maintenance. Investors here prioritize appreciation and stability over cash flow. |
| B class | 8% to 12% | Stable working class areas, solid tenant pool, moderate maintenance. The sweet spot for most cash flow investors. Balanced risk and return. |
| C class | 10% to 15% | Lower income neighborhoods, older housing stock, higher vacancy and maintenance costs. Higher CoC compensates for more hands on management. |
| D class | 15%+ (on paper) | High crime, significant deferred maintenance, frequent non payment and evictions. The gap between projected and actual CoC is largest here. Many investors who chase D class CoC end up with negative returns after accounting for real costs. |
A property advertising 18% CoC in a D class neighborhood sounds attractive until you factor in three months of vacancy per year, two evictions, $4,000 in turnover costs each time, and maintenance bills from deferred capital expenditures. The actual CoC after a full year of operations often lands between 2% and 6%, sometimes negative. Always stress test high CoC numbers against realistic vacancy and expense assumptions.
Real deal examples with actual numbers
Example 1: B class buy and hold, Midwest
The deal
3 bed / 1 bath single family in Indianapolis. Purchase price $135,000. Conventional loan, 25% down at 7.25% over 30 years. Closing costs $3,800. Light cosmetic rehab $5,200.
| Line Item | Monthly | Annual |
|---|---|---|
| Gross rent | $1,250 | $15,000 |
| PITI payment | ($920) | ($11,040) |
| Property management (10%) | ($125) | ($1,500) |
| Maintenance reserve (5%) | ($63) | ($756) |
| Vacancy reserve (5%) | ($63) | ($756) |
| Net cash flow | $79 | $948 |
Total cash invested: $33,750 (down) + $3,800 (closing) + $5,200 (rehab) = $42,750
Cash on cash return: $948 / $42,750 x 100 = 2.2%
At 2.2%, this deal barely covers a savings account yield. But this property sits in a neighborhood appreciating at 4% annually. Principal paydown adds another $2,800 per year in equity. The total return picture is different from the CoC number alone.
Example 2: BRRR deal, same market
The deal
Same neighborhood. Distressed 3 bed / 1 bath purchased for $85,000 cash. Rehab cost $28,000. After repair value $145,000. Cash out refinance at 75% LTV: $108,750 loan. After paying acquisition and rehab ($113,000), the investor has $4,250 remaining in the deal.
| Line Item | Monthly | Annual |
|---|---|---|
| Gross rent | $1,300 | $15,600 |
| PITI payment (on $108,750 at 7.5%) | ($985) | ($11,820) |
| Property management (10%) | ($130) | ($1,560) |
| Maintenance reserve (5%) | ($65) | ($780) |
| Vacancy reserve (5%) | ($65) | ($780) |
| Net cash flow | $55 | $660 |
Cash remaining in deal: $113,000 (all in cost) minus $108,750 (refi proceeds) = $4,250
Cash on cash return: $660 / $4,250 x 100 = 15.5%
Same market, same rent range. The BRRR strategy recovers most of the capital, drops the denominator from $42,750 to $4,250, and pushes CoC from 2.2% to 15.5%. The monthly cash flow is actually lower ($55 vs. $79), but the return on remaining capital is dramatically higher. This is why strategy matters more than a blanket "good CoC" number.
Why CoC alone is not enough
Cash on cash return measures one thing: how much cash your invested dollars produce each year. It ignores four other sources of return that often dwarf cash flow, especially in appreciating markets.
Income
Monthly cash flow and annual CoC return. The metric most investors fixate on.
Debt Paydown
Your tenant's rent payments reduce your loan balance each month. On a $100,000 loan at 7%, roughly $2,400 goes to principal in year one.
Equity Capture
Buying below market value or forcing appreciation through rehab. A property bought at $85,000 and rehabbed to $145,000 creates $32,000 in instant equity after costs.
Appreciation
Market level price growth. A $145,000 property appreciating at 3.5% per year gains roughly $5,000 in year one without you doing anything.
Leverage Efficiency
How effectively you use borrowed money to amplify returns. Putting $40,000 down to control a $150,000 asset means your equity grows on the full $150,000, not just on your $40,000. A 4% price increase adds $6,000 to your equity on a $40,000 investment, a 15% return on your cash from appreciation alone.
A deal with 6% CoC but strong equity capture, solid appreciation, and efficient leverage might deliver 22% total return. A deal with 14% CoC in a flat market with no equity upside might deliver exactly 14%. Looking at CoC alone makes the second deal look better. Looking at total return reveals the opposite.
Five mistakes that distort your CoC calculation
How interest rates change the CoC picture
The same property produces dramatically different CoC returns at different interest rates. This is the single biggest variable most investors underestimate when comparing deals across different rate environments.
| Interest Rate | Monthly P&I ($100K loan) | Annual Cash Flow | CoC (on $40K invested) |
|---|---|---|---|
| 5.0% | $537 | $3,156 | 7.9% |
| 6.0% | $600 | $2,400 | 6.0% |
| 7.0% | $665 | $1,620 | 4.1% |
| 7.5% | $699 | $1,212 | 3.0% |
| 8.0% | $734 | $792 | 2.0% |
From 5.0% to 8.0%, CoC drops from 7.9% to 2.0% on the exact same property. This is why deals that worked at 4% rates in 2021 stopped working at 7% rates in 2024. The property did not change. The cost of debt did. Investors buying in high rate environments need to either find deeper discounts on purchase price, target higher rent to price ratios, or accept lower CoC while planning for a future refinance at lower rates.
Some investors accept 3% to 4% CoC today knowing they can refinance when rates drop. If rates decline from 7.5% to 5.5%, that same property jumps from 3.0% to 6.5% CoC with no change in rent or expenses. The key is having enough reserves to cover the thin cash flow until rates come down. This is a bet on the rate cycle, not the property.
How DoorVault tracks CoC against benchmarks
DoorVault computes real time cash on cash return per property using actual income and expenses, not pro forma projections that never get updated after closing.