8%? 12%? 18%? Realistic CoC return benchmarks for short-term rentals in 2026, plus the line items most buyers miss when calculating.
Cash-on-cash (CoC) return = annual pre-tax cash flow / total cash invested. It’s the single most useful number when comparing two STR deals because it tells you, in plain terms, what percent of your invested capital you keep each year.
What counts as “good”? In 2026, with rates where they are, the honest benchmarks are:
- Below 4% CoC — borderline. Better off in T-bills.
- 4–7% CoC — appreciation play. You’re not buying for cash flow; you’re betting on the property’s value rising.
- 7–12% CoC — solid. Most well-underwritten STR purchases in 2026 land here at year 1, with upside as you stabilize.
- 12–18% CoC — strong. Usually requires either an under-market acquisition or an under-monetized property you’ll re-position.
- Above 18% CoC — verify the math twice. Either you missed a cost or the seller misrepresented revenue.
These ranges are tighter than they were in 2021. Rates north of 7% on investment property have compressed achievable CoC across the board. A 2021-era 18% CoC deal is a 2026-era 9% deal at the same purchase price.
The CoC formula, exactly
CoC = (Annual revenue − Annual operating expenses − Annual debt service) / Total cash investedWhere Total cash invested = down payment + closing costs + furnishing + initial reserves + first-month operating capital. Not just down payment. The most common buyer mistake is dividing by down payment alone, which inflates CoC by 30–60%.
Cash-on-Cash Return Calculator does this math correctly; it splits invested cash into its 5 components and runs sensitivity at -10/-20% revenue.
The line items that wreck CoC
When buyers underwrite optimistically, it’s usually because they missed or under-estimated one of these:
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Cleaning costs net of cleaning fees collected. Most cleaning fees don’t fully cover the actual cleaning cost when you factor in linen depreciation, supplies, restocking. Budget $0–$30 per turnover net cost (i.e., you may net out close to even but not above).
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Property management or PM tool subscription. Self-managing means $1,200–$3,000/yr in tools (Hospitable, Hostfully, OwnerRez, PriceLabs, AirDNA). Paying a PM means 20–25% of gross revenue gone. Cuts CoC roughly in half. Hospitable Hostfully
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Capex reserve. Furniture refresh every 4–5 years on a 3-bed = $4,000–$6,000 / 4 = $1,000–$1,500/yr. Many spreadsheets show $0 here. Wrong.
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Insurance — STR-specific, not homeowners. $1,800–$3,600/yr for the right policy. The cheapest homeowners policy doesn’t cover STR use; the claim gets denied; you pay.
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Lodging tax on direct bookings only. Platforms collect their share. But if any portion of your bookings are direct, you pay the state/local lodging tax yourself. Budget for it.
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Permitting + license renewal. Most regulated markets are $200–$1,500/yr. The Renewal Calendar workbook tracks it; underwriting should include it.
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HOA / condo fees, where applicable. STR-restrictive HOAs may charge a higher commercial-use fee. Verify before close.
The Year-1 Cash Needs Calculator walks the full invested-capital stack so you’re dividing by the right denominator.
What good looks like — worked example
3-bedroom Asheville STR. Purchase price $475,000.
| Conservative | Optimistic | |
|---|---|---|
| Annual revenue | $52,000 | $68,000 |
| Operating expenses | $22,000 | $20,000 |
| Annual debt service (25% down, 7.5% conventional) | $30,000 | $30,000 |
| Pre-tax cash flow | $0 | $18,000 |
| Total cash invested (down + closing + furnish + reserves) | $165,000 | $165,000 |
| CoC % | 0% | 10.9% |
Same deal. Two underwriting assumptions. The buyer who paid optimistic comps clears the closing table on $52k revenue thinking they’ll see $68k; year 1 they hit $52k; CoC is zero; cash position erodes from reserves; year 2 they’re listing for sale.
The fix is conservative underwriting (revenue × 0.80, occupancy × 0.75) from Analyzing Airbnb Comps Before You Buy. If the deal needs optimistic revenue to clear single-digit CoC, walk.
The cash-flow vs. appreciation choice
A 4% CoC deal in Sedona that appreciates 6%/yr returns ~10% all-in over 5 years (the appreciation is leveraged, so on cash invested the return is higher than 6%).
A 14% CoC deal in a flat-market secondary city returns ~14% all-in over 5 years.
Which is better? Depends on:
- Your tax position. Cash-flow is taxed at ordinary income (less depreciation shield); appreciation is long-term capital gains at exit. Cash-flow loses more to tax for high earners.
- Your liquidity needs. Cash flow is monthly; appreciation is at sale.
- Your time horizon. Under 5 years, transaction costs eat 5–8% of price on exit — appreciation has to be strong to overcome.
There’s no universal answer. The CoC calculator surfaces the cash component; you weigh appreciation separately.
What to actually do
- Run Cash-on-Cash Return with conservative revenue (use the comp-discount method).
- Stress-test at -10% and -20% revenue. Does CoC stay positive?
- Compare to a 4% T-bill alternative. If your stress-tested CoC is below 4%, you’re taking property risk for treasury yield.
- Only after this — look at appreciation upside, depreciation tax shield, and the “do I want to host?” question.
The expense lines that wreck CoC are exactly the ones buyers leave off the spreadsheet — and most of them are on the free 47-point pre-purchase checklist. Run it before you trust your own CoC number.
Most STR buyers’ first deal underperforms because they fell in love with the property before they ran the CoC at conservative assumptions. The math is supposed to be unromantic.