What Is a Good Cash-on-Cash Return? 2026 Deal Thresholds

Calibrated 2026 thresholds for cash-on-cash, cap rate, DSCR, IRR and rent ratio at 6.67% money — with the full CasaWise Deal Score table and two worked deals.

At today's cost of debt, 6% cash-on-cash is the top of the scale, 2% is par, and −5% is a zero. That is not a lowered standard — it is the same standard measured against money that costs 6.67% instead of 4%, and CasaWise publishes the whole calibrated curve rather than repeating a threshold set when debt was half the price.

Good rental property numbers in 2026, from the CasaWise Deal Score: cash-on-cash 2% par / 6% ceiling; cap rate 5.0% / 7.0%; DSCR 1.15 / 1.40; IRR 9% / 18%; rent ratio 0.65% / 0.95%. Here is where each came from, and what a Strong deal and a Caution deal look like scored by hand.

The thresholds you were taught were priced off money that no longer exists

The 30-year fixed rate mortgage average was 6.67% in the week of 13 August 2026. The same series shows what money cost through the 2010s, when the 1% rule, the 8–12% cash-on-cash target and the 10% cap rate benchmark entered circulation. Those numbers were not wrong. They were priced.

Watch what happens when only the rate changes. A duplex at $215,000 with $2,150 monthly rent, 25% down, normal cost load — the deal worked in full below. Nothing about the building, the rent, the taxes or the reserves moves:

The 8–12% target was hit by the mortgage, not by the asset. Publish it today unadjusted and you get one of two outcomes: you reject every deal in your market, or you shave the vacancy line and delete the CapEx reserve until the spreadsheet agrees with you. The second is the expensive failure, and it is easy to catch — the US rental vacancy rate was 7.3% in Q2 2026, so a 4% vacancy assumption is a choice, not a default.

The Deal Score anchors, in full

CasaWise scores five metrics on a 0–100 piecewise-linear curve and weights them. The anchors are calibrated to roughly a 7% rate environment, which is why they differ from the rules of thumb published elsewhere.

Bands: 80–100 Strong · 50–79 Fair · 20–49 Caution · 0–19 High Risk.

The curve is piecewise, so the slope from floor to midpoint is not the slope from midpoint to ceiling. And every input is scored after vacancy and a CapEx reserve have already been deducted — which is why the cash-on-cash ceiling sits where it does.

Metric by metric: the old rule, why it moved, where the curve sits

Cash-on-cash: 8–12% was the professional target, 6% is the ceiling, and both are true

The CasaWise calculations page states that professional investors typically target 8–12%+ cash-on-cash. The Deal Score puts 6% at the ceiling. That tension is real and deserves a straight answer.

The 8–12% figure is the historical professional target — what a leveraged rental returned when debt was cheap, and what many operators still carry as the pass mark. The Deal Score curve is calibrated to what is achievable at 6.67% money on underwriting that does not cheat. The table above shows the gap is almost entirely the debt constant.

There is a second reason not to import the aspirational number into the engine. CasaWise deducts vacancy before NOI and deducts a CapEx reserve as its own line — separate from operating expenses, because big-ticket repairs run far above routine costs in a worst case. A figure produced that way is already conservative. Grading it against a threshold built on looser inputs penalises the same deal twice: once when the reserve leaves NOI, again when the reduced return is measured against a benchmark that never had a reserve in it.

Use 8–12% as an aspiration for what you go looking for. Use the curve for what you are holding.

Cap rate: 6–8% is still strong, and the curve tops out at 7%

A 6–8% cap rate is strong in most markets, and the curve agrees — 7.0% scores 100. Cap rate moved less than cash-on-cash because it is unlevered: a rate shock reaches it only through price. It is also the number most often quoted at you by a seller, because NOI is the easiest input to inflate — drop the vacancy allowance, omit management, forget the reserve, and a 5% cap becomes a 7% cap without touching the building.

DSCR: 1.20 is the lender's line, 1.15 is par, 0.95 is a zero

Lenders typically require 1.20+. The midpoint sits just under it at 1.15, the ceiling at 1.40. A DSCR of 1.0 is break-even before any maintenance surprise; below 1.0 the property loses money from day one and you fund it out of income earned elsewhere. Be extremely cautious about acquiring a property that produces negative cash flow from the outset — the tail outcome is not a bad year, it is foreclosure. DSCR carries 20% of the weight because it is the only metric that speaks to survival rather than return.

IRR: 40% of the weight, because it is the only metric that prices time

IRR carries the largest weight because it is the only one of the five that accounts for holding period, amortisation, appreciation and the exit in a single number. Cash-on-cash sees Year 1; cap rate sees one year with no financing in it. CasaWise solves IRR by Newton-Raphson on the projected cash flow series. Floor-to-midpoint and midpoint-to-ceiling slopes match, so the curve is effectively linear: score ≈ IRR ÷ 18 × 100.

Rent ratio: 5% of the weight, and it has not earned more

Rent ratio is monthly rent divided by purchase price — fast, useful for sorting a list, and blind to property taxes, insurance, HOA dues, vacancy and financing. That blindness is why it carries the smallest weight.

The 1% rule, demolished with arithmetic

Is the 1% rule still valid? As a target it points roughly at the right place. As a screen it fails in both directions.

Under a standard cost load — 7% vacancy, 8% management, 5% maintenance, 5% CapEx reserve, 1.1% property tax, 0.45% insurance — cap rate collapses to a clean function of the rent ratio:

Cap rate % = 12 x (1 − 0.07 − 0.18) x rent ratio %  −  (1.10 + 0.45)
           = 9 x rent ratio %  −  1.55

At a 1.00% rent ratio that is 9.00 − 1.55 = 7.45% cap, above the Deal Score ceiling. At 0.95% it is 8.55 − 1.55 = 7.00%, landing exactly on the cap ceiling. The two anchors were calibrated as one system, and you can verify it in a line of arithmetic.

Now price the debt. At 6.67% over 30 years the annual constant is 7.7195% of the loan; at 75% LTV that is 5.7896% of purchase price per year.

The ratio that merely breaks even on debt service climbed from about 0.65% to about 0.82%. The ratio clearing a lender's 1.20 climbed to 0.944% — which is why the score's rent-ratio ceiling is 0.95% and not 1%. It is the lender-grade line, not an aspiration.

Here is what the rule cannot see. Two properties, both at exactly a 1.00% rent ratio, both $215,000 at $2,150/month, both 25% down:

Identical on the rule. Sixty points apart on the score.

Worked deal one: a Strong-band duplex, scored by hand

A $215,000 duplex, two units at $1,075. Ten-year hold, 3% appreciation, 2.5% rent growth from Year 2, 6% selling costs.

Down payment (25%)      $53,750
Rehab                   $10,000
Closing costs            $4,300
Cash invested           $68,050
Loan: $161,250 @ 6.67%, 30-yr  →  $1,037.30/mo  →  ADS $12,447.60

Gross scheduled rent    $25,800   ($2,150 x 12)
Less vacancy 7%         −$1,806
Effective gross rent    $23,994

Property tax 1.10%       $2,365.00
Insurance 0.45%            $967.50
Management 8%            $2,064.00
Maintenance 5%           $1,290.00
CapEx reserve 5%         $1,290.00
Total operating costs    $7,976.50

NOI                     $16,017.50   ($23,994 − $7,976.50)
Annual cash flow         $3,569.90   ($16,017.50 − $12,447.60) = $297/mo

Cap rate     $16,017.50 / $215,000    = 7.45%
Cash-on-cash  $3,569.90 / $68,050     = 5.25%
DSCR         $16,017.50 / $12,447.60  = 1.287
Rent ratio       $2,150 / $215,000    = 1.000%
IRR (10-yr; exit value $288,942, balance $137,279, net proceeds $134,326) = 12.82%

Note what Strong costs to build: two metrics pinned at their ceilings, cash-on-cash near the top of its range — and it still clears the band by 1.6 points. Strong is rare on purpose.

Worked deal two: a Caution-band single-family, scored by hand

A $265,000 single-family rental. Same $2,150 rent, same 25% down, no rehab, slightly higher tax rate. This is the deal that passes the eyeball test.

Down payment (25%)      $66,250
Closing costs            $5,300
Cash invested           $71,550
Loan: $198,750 @ 6.67%, 30-yr  →  $1,278.53/mo  →  ADS $15,342.36

Effective gross rent    $23,994   ($25,800 less 7% vacancy)

Property tax 1.20%       $3,180.00
Insurance 0.45%          $1,192.50
Management 8%            $2,064.00
Maintenance 5%           $1,290.00
CapEx reserve 5%         $1,290.00
Total operating costs    $9,016.50

NOI                     $14,977.50
Annual cash flow          −$364.86   = −$30/mo

Cap rate     $14,977.50 / $265,000    = 5.65%
Cash-on-cash    −$364.86 / $71,550    = −0.51%
DSCR         $14,977.50 / $15,342.36  = 0.976
Rent ratio       $2,150 / $265,000    = 0.811%
IRR (10-yr; exit value $356,138, balance $169,205, net proceeds $165,565) = 9.91%

Every headline number reads acceptably. A 5.65% cap is respectable, a 0.811% rent ratio beats par, a 9.91% IRR sounds like a fine ten-year outcome. The score is 41.8 because DSCR at 0.976 is below break-even and cash-on-cash is negative. You would be paying $30 a month for the privilege and calling the appreciation a plan. You can't eat appreciation — cash flow is the only liquid pillar. Note also that $50,000 of price moved the score 40 points on identical rent. Price is the one variable you control at the offer stage.

A good deal for whom?

The score is a starting point, not a verdict, because "good" depends on three things the number does not know.

Holding period. IRR carries 40% of the weight and assumes you hold to the modelled exit. Sell in three years and the 6% selling cost plus the little principal retired make the same property materially worse than the ten-year figure suggests. Hold to a paid-off loan and Year-1 cash-on-cash barely matters.

Cost of capital. A 5.25% cash-on-cash on borrowed money and a 5.25% cash-on-cash on money you would otherwise leave in Treasuries are not the same decision. The score does not know your alternative. Deal Two at 41.8 could be rational for an operator with a specific reason to place capital in that submarket; Deal One at 81.6 is wrong for someone who needs the money back in eighteen months.

The objective. If you want income, DSCR and cash-on-cash govern, and a Caution score with negative cash flow is disqualifying. If you are recycling capital — buy, force value, refinance out — what governs is how much of your basis comes back, and thin Year-1 cash-on-cash is an acceptable price for a large refinance. Different businesses, same buildings.

Run your own numbers against these anchors rather than a rule of thumb from a cheaper decade. The full calculation engine — cash flow, cap rate, cash-on-cash, DSCR, IRR, three-scenario analysis and the Deal Score — is on the free tier with no credit card, and the engineer who built the model publishes every formula behind it. Before you make an offer, work the deal end to end.

Frequently Asked Questions