A ‘good’ cash-on-cash return in Maryland depends entirely on the county and the investor’s strategy: Baltimore City: 8%–14% CoC with professional management is the achievable target for well-renovated investor-grade properties; anything above 8% is strong. Carroll County: 6%–11% CoC is achievable but requires active vacancy management. Baltimore County and Frederick County: 4%–8% CoC is the realistic range at current prices with conventional financing and professional management. Montgomery County and Howard County: 3%–6% CoC is typical in these markets, the investor is primarily building wealth through appreciation (which the IRR captures better than CoC) rather than current income. A Maryland investor who only targets Baltimore City-level CoC will never buy in Montgomery County. One who understands the total return picture can build a diversified portfolio across markets with different CoC profiles but strong total returns.

Cash-on-cash return (CoC) and return on investment (ROI) are often used interchangeably but measure different things. Cash-on-cash return specifically measures annual pre-tax cash flow (after all expenses and debt service) as a percentage of total cash invested. ROI is a broader metric that can include equity paydown (principal reduction on the mortgage), appreciation (increase in property value), and tax benefits in addition to cash flow. For rental property analysis: CoC is the most useful year-one cash return metric. Total ROI (or IRR) captures the complete picture over the hold period. An investor might have a 5% CoC return but a 14% total ROI/IRR when appreciation, equity paydown, and tax benefits are included which is why using only CoC can understate the total attractiveness of a Maryland rental investment in appreciation-driven markets.

The complete expense list for a Maryland rental property CoC calculation: (1) Mortgage debt service (Principal + Interest + Impound for taxes and insurance if escrowed) the full PITI payment; (2) Property taxes (if not impounded in mortgage) Maryland county property tax rate × assessed value; (3) Landlord insurance premium; (4) Vacancy allowance typically 5%–10% of gross rent in most Maryland markets (Baltimore City at higher end, Montgomery County at lower end); (5) Maintenance reserve typically 8%–12% of gross rent for older properties, 5%–8% for newer/recently renovated; (6) Property management fee 8%–12% of collected rent for professional PM; (7) Any utilities included in rent; (8) HOA fees (for townhouse and condo investments). Do NOT include: mortgage principal repayment (this is equity building, not an expense), depreciation (non-cash deduction), or capital improvements (treated separately from operating expenses).

Renovation affects cash-on-cash return through two mechanisms simultaneously: (1) Renovation increases the denominator (total cash invested) every dollar spent on renovation increases the total capital deployed, which reduces the CoC percentage unless rent increases offset it; (2) Renovation increases the numerator (annual cash flow) by increasing achievable rent and/or reducing annual maintenance expenses. The net effect depends on the renovation ROI: a $15,000 renovation that increases monthly rent by $250 ($3,000/year gross, $2,190/year after vacancy and expenses) adds $2,190 to the annual cash flow while adding $15,000 to the denominator. On a $74,050 base investment: CoC increases from 2.5% to 5.4%. The renovation improves CoC significantly. A $15,000 renovation that only increases rent by $75/month ($900/year gross, $657/year after expenses) reduces CoC the cost exceeds the return. Run the renovation ROI model before committing renovation scope.