Cash-on-Cash Return in Florida: The Number That Includes Your Insurance Bill

Educational content only. This article is for informational purposes and does not constitute financial, legal, or lending advice. Loan programs, rates, and eligibility requirements change frequently. Consult a licensed mortgage professional before making any borrowing decision. Mortgage Capital | NMLS# 1859012 | Licensed in Florida.

Cash-on-cash return Florida investors calculate divides the year's cash flow after the mortgage by the cash they put in.

Insurance and property taxes make the Florida figure lower than the listing's cap rate suggests. Our cash-on-cash calculator runs it.

The formula

Annual pre-tax cash flow divided by total cash invested.

Cash flow is rent minus operating expenses minus debt service.

Cash invested is down payment plus closing costs plus initial repairs.

The result is a percentage.

It measures the return on your money, not the property.

Cash-on-cash versus cap rate

Cap rate ignores financing: net operating income divided by price.

See our cap rate calculator.

Cash-on-cash includes the mortgage.

Leverage raises cash-on-cash when the loan rate is below the cap rate.

It lowers it when the loan rate is above.

Florida's expense side

Insurance is the line that breaks projections here.

See our guide to Florida homeowners insurance cost.

Property taxes reset at purchase.

See our guide to the non-homestead cap in Florida.

Use quotes, not the seller's numbers.

Other expenses to include

Management, maintenance reserve, vacancy allowance, association dues and CDD fees.

See our guide to CDD fees in Florida.

Lawn and pool service in single-family rentals.

Capital reserve for roof and air conditioning.

A South Florida roof is a real line item.

Debt service

Principal and interest on the investor loan.

See our guide to investment property mortgage rates in Florida.

Investor rates run above owner-occupied.

A DSCR loan's rate depends on the ratio.

The Investopedia definition matches the way lenders read it.

Cash invested

Down payment of 20 to 25 percent on most investor loans.

See our guide to loan-to-value in Florida.

Closing costs including Florida doc stamps.

See our guide to Florida doc stamps and intangible tax.

Repairs and furnishing if any.

What a good number is

It depends on the alternative use of the cash.

Many investors target high single digits to low double digits.

South Florida's prices push many properties lower.

Appreciation and principal paydown are not in the number.

It is one measure, not the whole picture.

How leverage changes it

More debt means less cash in and, if the property cash flows, a higher percentage.

It also means thinner cash flow and more risk.

See our guide to DSCR loans for Florida rental investors.

A high cash-on-cash on a thin margin can flip negative with one insurance renewal.

Stress test the expenses.

Short-term rentals

Higher gross, much higher expenses.

See our guide to long-term versus short-term rentals in Florida.

Furnishing adds to cash invested.

Seasonality makes the annual figure lumpy.

Use a full year of data or a conservative projection.

BRRRR and refinancing

A cash-out refinance after a rehab returns part of the cash invested.

See our guide to the BRRRR method in Florida.

Cash-on-cash rises as cash invested falls.

Debt service rises too.

Recalculate after every refinance.

House hacking

Owner-occupied multi-unit purchases use low down payments.

See our guide to house hacking in Florida.

Cash invested is small, so cash-on-cash is high even with modest cash flow.

Your own housing cost is part of the return.

Count it honestly.

Taxes and the number

Cash-on-cash is pre-tax.

Depreciation shelters some rental income.

See our guide to how to buy a rental property in Florida.

After-tax return is higher than the pre-tax number suggests for many investors.

A tax adviser models it.

Year one versus later years

Year one includes purchase costs and any repairs.

Later years see rent growth and expense growth.

Florida insurance has grown faster than rent in recent years.

Project several years, not one.

The 10 percent tax cap slows but does not stop tax growth.

Comparing two properties

Same cash invested, different cash flow: the higher cash-on-cash wins on this measure.

Different cash invested: compare the percentages and the absolute dollars.

A condo with high dues and a house with high insurance can land in the same place.

See our guide to condo versus townhouse financing in Florida.

The details decide.

What the lender calculates instead

DSCR: rent divided by the mortgage payment including taxes and insurance.

See our guide to DSCR loan rates in Florida.

A ratio above one means the rent covers the payment.

Cash-on-cash is your number; DSCR is theirs.

Both use the same inputs.

A worked example

A single-family rental with a typical South Florida price, 25 percent down and investor-rate financing.

Rent covers the mortgage, taxes, insurance and management with a modest surplus.

Divide the surplus by the down payment plus closing costs.

The result is a low single-digit percentage before appreciation.

An insurance increase of a few hundred dollars a month turns it negative.

Where to start

Get insurance and tax figures for the specific property, not the listing's estimates.

Run the cash-on-cash with those and a realistic vacancy allowance.

Then start a conversation and we will price the loan that feeds the debt service line.