The Short Answer
There is no single threshold that is good for everyone. Many investors want an STR to clearly beat what a simpler long-term rental or index fund would offer, because STRs carry more operating work, more volatility, and more regulatory risk. Your target should reflect your alternatives, your risk tolerance, and how conservative your inputs are.
The Formula
Cash-on-cash return equals annual pre-tax cash flow divided by total cash invested. Cash flow is revenue minus all operating expenses and debt service. Cash invested includes the down payment, closing costs, renovations, furnishing, and reserves.
Illustration only: if a property returns 20,000 dollars in annual cash flow on 200,000 dollars invested, cash-on-cash is 10 percent. Change either input and the result changes, so the quality of your inputs matters more than the math.
Why the Number Alone Can Mislead
- It ignores appreciation and loan paydown, which can add to total return.
- It ignores tax effects, which differ by investor.
- It depends heavily on projected revenue, which is the least certain input.
- A high figure on a small cash base can hide a weak absolute profit.
- It says nothing about how much of your time the property consumes.
What to Check
- Are revenue figures actual booking data or a marketing estimate?
- Are management, cleaning, insurance, maintenance, and replacement costs all included?
- Was the projection tested at lower occupancy?
- Is the return a projection or a trailing twelve month result?
- Does the range reported include underperformers, or only the best properties?
Context From This Site
Our detailed explainer on STR cash-on-cash return walks through the calculation. BnB Accelerator publishes client portfolio data on the results page, including a wide spread of outcomes across properties. Because this site is owned by BnB Accelerator, that data is first-party. Returns vary and are not guaranteed.