Cash-on-cash return is the most honest single metric for evaluating a short-term rental investment. Here's how to calculate it the right way, what makes a number good or great by market, and how to use it to compare deals across different markets and price points.
There are many ways to evaluate a short-term rental investment. Cap rate, gross yield, net operating income. But for investors who are financing a purchase with a mortgage, cash-on-cash return is the number that actually matters. It tells you how much your invested cash earns in a year relative to what you put in. This guide explains how to calculate it correctly, what expenses to include, and how to benchmark it across markets.
Cash-on-cash return (CoC) measures your annual pre-tax cash flow against your total cash invested. The formula is straightforward:
If you put $120,000 into a property (down payment, closing costs, furnishing) and generate $12,000 in net cash flow after all expenses and your mortgage payment, your CoC return is 10%. That's the number that tells you whether the investment is working.
Most investors undercount their total cash invested, which makes their CoC return look better than it is. Total cash invested should include:
Leaving out furnishing costs is the most common mistake. A property that requires $40,000 to furnish before its first guest checks in has a meaningfully different CoC return than one where you just need to stock the kitchen.
Net cash flow is gross revenue minus all operating expenses and your mortgage payment. Here's how VaultSTR models it for every deal in the Deal Vault:
Net cash flow = gross revenue - (all of the above). Divide that by your total cash invested and you have your CoC return.
The benchmark varies by market and by what you're comparing to. Broadly:
Context matters. A 9% CoC return in a Scottsdale luxury market where comparable properties are producing 7% is a strong deal. A 9% return in a Smoky Mountain market where the median deal produces 14% is a below-average one. This is why VaultSTR uses market-adjusted ratings rather than a single universal benchmark.
Most listing-agent pro formas and Airbnb host calculators inflate your projected return in predictable ways:
Run conservative assumptions. If the deal still pencils on the low end, it's worth pursuing. If it only works on optimistic projections, it probably won't.
The easiest way to compare cash-on-cash returns across different markets without building your own spreadsheet for each deal is the VaultSTR Deal Vault. Every active deal in the database is underwritten with the same methodology, so sorting by CoC return gives you a genuine apples-to-apples comparison across 30+ markets.
If you want those comparisons delivered daily without logging in to browse, the VaultSTR Daily Deal newsletter sends the highest-rated new deals to your inbox every morning with projected revenue, net cash flow, and CoC return already calculated. It's free to subscribe.
Cash-on-cash return is the starting point, not the final answer. Before you go under contract on a deal that hits your return threshold, confirm your assumptions with a VaultSTR Pro Forma using your own numbers, verify STR regulations for that specific municipality (not just the county), confirm your DSCR loan terms with a lender who specializes in STR financing, and get your STR insurance quote before closing so there are no surprises on your expense model.
CoC return gives you a reliable filter. It lets you quickly eliminate the deals that won't work and focus your time on the ones that might. For STR investors, that's the most valuable thing a single number can do.
The VaultSTR Deal Vault lets you sort every active STR investment deal by projected cash-on-cash return, gross revenue, and net cash flow. All deals pre-underwritten. All numbers calculated the same way.
Updated daily. 30+ STR markets. Real underwriting.
What is cash-on-cash return for a short-term rental?
Cash-on-cash return (CoC) measures your annual pre-tax net cash flow divided by your total cash invested, including down payment, closing costs, and furnishing budget. If you invested $120,000 and generated $12,000 in net cash flow after all expenses and mortgage payments, your CoC return is 10%.
What is a good cash-on-cash return for an STR?
A good STR cash-on-cash return is generally 8% or higher. Solid deals in top-performing markets typically land between 8-12%. Returns of 12-20%+ are strong and usually found in lower cost-of-entry markets with high demand, like the Smoky Mountains, Gulf Coast, and Blue Ridge. What counts as good also depends on the specific market — a 9% return can be above or below average depending on where the property is.
What expenses should I include when calculating STR cash-on-cash return?
To get an accurate CoC return, include property management (20-30% of gross revenue), cleaning and supplies, platform fees (approximately 3% for Airbnb), STR-specific insurance, maintenance reserves (1-2% of property value annually), property taxes, and your mortgage payment. Most investors undercount total cash invested by leaving out furnishing costs, which can be $15,000 to $60,000 or more.
How is STR revenue estimated for underwriting?
STR revenue is estimated by pulling comparable data from platforms like AirDNA and Rabbu, which track actual occupancy rates and average daily rates (ADR) for similar properties in the same market. VaultSTR uses this comparable data to project annual gross revenue for every deal in the Deal Vault — not listing-agent estimates or best-case projections.
What is a DSCR loan and why does it matter for CoC calculations?
A DSCR (Debt Service Coverage Ratio) loan qualifies based on the property's rental income rather than your personal W-2 income. Most STR investors use DSCR loans because conventional financing doesn't account for short-term rental income properly. DSCR rates typically run 1.5-2.5% above conventional rates, which meaningfully affects your mortgage payment and cash-on-cash return calculation.
Where can I find STR deals sorted by cash-on-cash return?
The VaultSTR Deal Vault at vaultstr.com/deals lets you sort every active STR deal by projected cash-on-cash return, gross revenue, or net cash flow. Every deal is pre-underwritten with the same methodology so the comparison is apples-to-apples across 30+ markets. You can also subscribe to the Daily Deal newsletter at dailydeal.substack.com to get the highest-rated deals sent to your inbox each morning.
Subscribe to the VaultSTR Daily Deal newsletter and get pre-underwritten short-term rental properties with real cash-on-cash returns sent to your inbox every morning.
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