Cash-on-cash return is calculated by dividing a rental property’s annual pre-tax cash flow by the total cash you invested.
Formula:
Cash-on-cash return = Annual pre-tax cash flow ÷ Total cash invested × 100
For a Clarksville rental, your analysis should include realistic rent, vacancy, Montgomery County property taxes, landlord insurance, management, maintenance, capital reserves, financing, closing costs, and initial repairs. A property can have strong Fort Campbell rental demand and still produce a weak or negative cash-on-cash return if the purchase price and mortgage payment are too high.
This example uses a realistic Montgomery County purchase price and rental assumptions to show how the calculation works.
What does cash-on-cash return measure?
Cash-on-cash return measures the annual return on the money you personally put into the investment. It is different from cap rate because it accounts for financing and focuses on your actual cash invested.
The calculation generally uses:
- Annual rent collected after vacancy and collection loss
- Operating expenses
- Mortgage principal and interest
- Initial cash invested, including the down payment and acquisition costs
Cash-on-cash return usually does not include:
- Property appreciation
- Tax benefits
- Depreciation
- Principal paydown as a non-cash wealth-building benefit
- Future rent growth
- Sales proceeds
That makes it a useful first-year cash-flow measurement, but not a complete measure of total investment performance.
What formula should you use for a Clarksville rental?
Use this four-step process:
- Calculate scheduled annual rent.
- Subtract vacancy and collection loss.
- Subtract operating expenses and annual debt service.
- Divide the resulting cash flow by your total cash invested.
The most important distinction is between net operating income and cash flow after financing.
Net operating income, or NOI, is rental income minus operating expenses. It does not include mortgage payments.
Pre-tax cash flow is NOI minus annual mortgage principal and interest.
For cash-on-cash return, use pre-tax cash flow, not gross rent and not NOI alone.
Which Clarksville assumptions belong in the calculation?
For a practical local example, assume you are evaluating a single-family rental in Montgomery County with the following profile:
| Assumption | Example |
|---|---|
| Purchase price | $349,900 |
| Monthly rent | $1,850 |
| Down payment | 25% |
| Loan amount | $262,425 |
| Vacancy allowance | 5% |
| Property taxes | $2,900 annually |
| Landlord insurance | $2,100 annually |
| Property management | 10% of collected rent |
| Maintenance reserve | 6% of scheduled rent |
| Capital reserve | 5% of scheduled rent |
| Owner-paid miscellaneous costs | $360 annually |
The $349,900 purchase price is consistent with the August 2026 Realtor.com Montgomery County market snapshot, which reported a $349,900 median listing price and a $1,450 median rent across 1,604 rental properties. That $1,450 figure is a broad market reference, not a rent opinion for a particular three- or four-bedroom home. A Fort Campbell-oriented single-family rental may achieve more, depending on size, condition, location, garage space, commute, and amenities.
You should replace every assumption with property-specific figures before making an offer.
How does the worked Clarksville example calculate?
Step 1: Calculate scheduled rent
At $1,850 per month:
$1,850 × 12 months = $22,200 scheduled annual rent
Step 2: Subtract vacancy
Using a 5% vacancy and collection-loss allowance:
$22,200 × 5% = $1,110 vacancy allowance
Estimated collected rent becomes:
$22,200 − $1,110 = $21,090 effective rental income
Step 3: Subtract operating expenses
The estimated annual operating expenses are:
- Property management: $2,109
- Montgomery County property taxes: $2,900
- Landlord insurance: $2,100
- Maintenance reserve: $1,332
- Capital reserve: $1,110
- Miscellaneous owner costs: $360
Total operating expenses:
$9,911 annually
Estimated NOI:
$21,090 − $9,911 = $11,179
This produces an estimated operating margin before debt service of approximately 3.2% based on the purchase price.
Step 4: Calculate mortgage debt service
Freddie Mac’s Primary Mortgage Market Survey reported the following national conforming mortgage-rate benchmarks as of October 1, 2026:
- 30-year fixed: 7.28%
- 15-year fixed: 6.60%
Using the 30-year fixed benchmark as an illustration, a $262,425 loan at 7.28% produces principal and interest of approximately $1,795 per month, or approximately:
$21,540 annual debt service
This is an underwriting illustration only. An investment-property lender may quote a different rate, require different reserves, charge points, or apply different underwriting standards.
Step 5: Calculate annual cash flow
$11,179 NOI − $21,540 debt service = −$10,361 annual cash flow
That equals approximately negative $863 per month before income taxes.
Step 6: Calculate total cash invested
Assume:
- Down payment: $87,475
- Closing costs, lender fees, inspections, and initial rent-ready work: $8,500
Total cash invested:
$95,975
Step 7: Calculate cash-on-cash return
−$10,361 ÷ $95,975 × 100 = −10.8% cash-on-cash return
Under these assumptions, the property does not produce positive first-year cash flow. That does not automatically mean it is a bad investment, but it does mean the investor would be contributing cash each month rather than receiving it.
A lower purchase price, larger down payment, seller concession, higher achievable rent, or a different property type could materially change the result.
Why does Fort Campbell rental demand affect vacancy assumptions?
Fort Campbell creates a local rental-demand pattern that differs from a generic national model. Military families, service members, civilian employees, contractors, and veterans create a recurring tenant pool. Permanent change-of-station activity also produces regular leasing demand.
However, Fort Campbell demand does not eliminate vacancy.
A 5% base-case assumption may be reasonable for a clean, correctly priced property with a practical floor plan and convenient access to major gates. You should also test a higher vacancy scenario because:
- PCS activity is concentrated during certain parts of the year.
- A property may sit between tenants during turnover.
- Poor photography, deferred maintenance, or an above-market rent can extend vacancy.
- Not every renter prioritizes proximity to post.
- New construction can increase competition in some corridors.
- A property farther from preferred gates may require a larger rent discount.
For a conservative analysis, test at least a 5% base case, an 8% stress case, and a more severe turnover scenario that includes leasing costs and several weeks without rent.
“Cash-on-cash return is useful because it forces an investor to test the cash they are actually putting at risk, not just the property’s headline rent. In Clarksville, Fort Campbell demand can support a conservative vacancy model, but it does not replace property-specific underwriting. The purchase price, condition, achievable rent, financing, and reserves still determine whether the investment works.”
Randy Whetsell, Haus Realty & Management, Tennessee Silver Level Veteran Ready Business, 2025–2026
Which expenses do investors commonly leave out?
The IRS Publication 527, Residential Rental Property, for the 2025 tax year identifies common rental income and expense categories, including insurance, interest, management fees, repairs, taxes, utilities, depreciation, advertising, commissions, and professional fees.
For investment analysis, remember that a reserve is not always the same as a current tax deduction. Routine repairs may be treated differently from improvements that must be capitalized and depreciated. Discuss your property’s tax treatment with a qualified tax professional.
Investors commonly underwrite too optimistically by leaving out:
- Leasing and renewal fees
- HVAC replacement
- Roof and exterior repairs
- Appliance replacement
- Landscaping or owner-paid utilities
- Property tax changes
- Insurance increases
- Turnover cleaning and paint
- HOA dues
- Legal or accounting costs
- Initial repairs needed before leasing
The purpose of reserves is not to make the spreadsheet look worse. It is to help you avoid being surprised by predictable ownership costs.
How should you use the result before making an offer?
Use cash-on-cash return as a screening tool, then compare several scenarios:
- Base case: Most likely rent, vacancy, expenses, and financing
- Conservative case: Higher vacancy, higher repairs, and lower rent
- Optimistic case: Strong leasing performance and favorable expenses
Next, compare the property against alternatives. Haus’s Clarksville rental-property investment guide provides additional local context on cap rates, cash flow, and Fort Campbell demand. You can also review Clarksville neighborhoods and rental-return considerations.
A property with a negative first-year return may still fit a long-term appreciation or principal-paydown strategy. However, you should understand exactly how much cash you may need to contribute each month and whether your reserves can support that plan.
What questions do Clarksville rental investors ask?
Is cash-on-cash return the same as cap rate?
No. Cap rate measures NOI against the property price and ignores financing. Cash-on-cash return measures pre-tax cash flow against the cash you invested.
Should I include mortgage principal in cash-on-cash return?
Yes. Mortgage principal is part of your actual annual debt-service payment and affects the cash remaining after financing. It is also a form of equity buildup, so track it separately as a wealth-building benefit.
What is a good cash-on-cash return in Clarksville?
There is no universal target. A higher projected return may involve more repairs, tenant turnover, management complexity, or location risk. Focus on whether the assumptions are accurate and whether the return compensates you for the risks.
Can Fort Campbell demand guarantee low vacancy?
No. It can support recurring demand, but property condition, rent, commute, marketing, tenant screening, and timing still affect vacancy.
How can you request a Clarksville rental-property analysis?
Before you buy, request a property-specific rental analysis using the address, expected rent, taxes, insurance quote, financing terms, management fees, reserves, and likely tenant profile.
Request a Clarksville rental-property analysis from Haus Realty & Management and review the deal using realistic local assumptions rather than gross-rent projections.
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