Cap Rate & Cash-on-Cash Calculator
Two core return metrics for evaluating an income property purchase.
Your numbers
Cap rate
7.37%
Cash-on-cash return 8.17%
- Net operating income (NOI)$28,000.00
- Cash invested (down + closing)$104,000.00
- Annual cash flow after debt service$8,500.00
- Cash-on-cash return8.17%
- Cap rate
- 7.37%
- Cash-on-cash
- 8.17%
- NOI
- $28,000
- Cash flow
- $8,500
Operating expenses are taxes, insurance, maintenance, management and a vacancy reserve — not mortgage payments. Cap rate ignores financing; cash-on-cash reflects it.
Frequently asked questions
What is a cap rate?+
Net operating income divided by the purchase price. It measures the property's income yield independent of how it is financed, which makes it the standard way to compare income properties.
What is cash-on-cash return?+
Annual cash flow after debt service divided by the cash you actually invested - down payment plus closing costs. It shows the return on your own money, so it depends on the financing.
Why use both?+
Cap rate ignores financing and cash-on-cash reflects it. A property can have a strong cap rate and a weak cash-on-cash return if the debt is expensive, so read them together.
Two ways to read a return
- Cap rate
- NOI over price - the property's yield if bought for cash. It makes properties comparable regardless of financing.
- Cash-on-cash
- Cash flow over the cash you put in. It rewards or punishes the financing you chose.
- Use both
- A high cap rate with costly debt can still deliver a poor cash-on-cash return - and the reverse.