Cap Rate vs. Cash-on-Cash Calculator
A property always sounds good in conversation. Run both return metrics before you believe the pitch.
Investment and Rental
What this article helps you decide
> Cap rate ignores your financing; cash-on-cash is all about it. Run both with the same honest assumptions and you'll stop overpaying for stories.
Work through the decision in order
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Cap Rate vs. Cash-on-Cash Calculator
Use the worksheet without a form. Keep your notes in this browser, then bring the live facts into a Real Estate Review if the decision still matters.
Questions about Cap Rate vs. Cash-on-Cash Calculator
Clear answers first. If one question changes the deal, bring it into the review before you move money.
Q1What's the difference between cap rate and cash-on-cash?+
Cap rate is unlevered (NOI ÷ price), so it ignores financing and compares properties on equal footing. Cash-on-cash is all about financing — annual pre-tax cash flow ÷ cash invested — and tells you what your actual money earns. You need both.
Q2Which metric should I use for what?+
Cap rate to compare properties against each other; cash-on-cash to judge what your specific down payment and loan return. A property can have a fine cap rate and a poor cash-on-cash once financing is in — that's why one number alone lies.
Q3What assumptions make a deal look better than it is?+
Understated vacancy, management, and capital expenditures. Cash-on-cash "looks great" mostly by omitting real costs — re-run with honest vacancy and a capex reserve and the story often changes.
Q4What's the 1% rule and is it useful here?+
It's a screen: monthly rent near 1% of purchase price earns a deeper look. At Eastside prices most in-city homes fail it badly, which is exactly why the local investor case leans on tax benefit, not rent-to-price.
Q5What counts in NOI — and what doesn't?+
NOI is rental income minus operating expenses (taxes, insurance, management, maintenance, vacancy) — but not your mortgage. Mixing debt service into NOI inflates the cap rate, so keep financing out of cap rate and in cash-on-cash.
Q6I have a deal that looks good — what next?+
Re-run both metrics with realistic vacancy and capex before you believe the pitch. Pressure-testing a real deal's numbers is part of a Real Estate Review.
Apply the article to the live decision.
Bring a deal and we'll pressure-test the numbers in a Real Estate Review.
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