See your actual annual return on invested capital — after all expenses, debt service, and vacancy. Austin property tax defaults included.
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At 7% mortgage rates, 4-7% cash-on-cash return is realistic for a well-run single-family rental with 20-25% down. Core Austin neighborhoods often produce 2-4% CoC — the investment case there relies more on appreciation. 7%+ is achievable in suburban markets or value-add properties.
Cap rate measures property performance independent of financing. Cash-on-cash measures what you actually earn on your invested capital after debt service. A 5.5% cap rate property financed at 7% will have a lower CoC — the debt is working against you (negative leverage).
Negative leverage occurs when your mortgage rate exceeds your cap rate. At 7% rates and 5-5.5% Austin cap rates, borrowing reduces your CoC versus paying cash. In 2021 at 3% rates and 4% cap rates, leverage was positive. Today's environment requires careful underwriting.
Investment property loans require 15-25% down on conventional financing. Most lenders require 20-25% for single-family investment properties. FHA and VA are owner-occupied only. Expect a 0.5-0.75% rate premium over owner-occupant rates.
At current rates, many Austin single-family rentals produce $0-$400/month positive cash flow with 25% down, or break-even to slightly negative with 20% down in core neighborhoods. The investment case often relies on appreciation and principal paydown rather than cash flow alone.
Austin's 1.95% property tax rate is one of the highest in the country. On a $450,000 property, that is $8,775/year ($731/month) — often 25-35% of gross rent. This makes Austin harder to cash-flow with leverage than lower-tax markets.
At today's rates with Austin cap rates at 5-5.5%, paying cash produces a higher CoC than financing at 7%. Cash buyers often get better deal pricing. However, financing allows you to buy more properties with the same capital. The right answer depends on your total capital, goals, and risk tolerance.
Cash-on-cash return = Annual Pre-Tax Cash Flow / Total Cash Invested. Annual cash flow = NOI minus annual debt service (P&I on the loan). Total cash invested = down payment + closing costs + rehab. DSCR = NOI / Annual Debt Service.
Debt service uses the standard 30-year amortization formula at the entered rate. This calculator does not include tax benefits (depreciation, interest deduction) or equity buildup from principal paydown — those add to total return but are not cash-on-cash. Last updated July 2026.
