Real Estate Cap Rate vs Cash-on-Cash Return Calculator

Calculate Cap Rate, Cash-on-Cash Return, NOI, and cash flow for rental properties. Compare unleveraged vs leveraged returns.

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Cap Rate = NOI / Purchase Price × 100. Cash-on-Cash = Annual Cash Flow / Total Cash Invested × 100. NOI = Gross Rent × (1-Vacancy) - Operating Expenses.
$300k property, 20% down ($60k), $2,500/mo rent, $800/mo op-ex, 5% vacancy, $1,600/mo loan payment: Cap Rate = 7.6%, Cash-on-Cash = 10.7%, NOI = $22,800, Annual Cash Flow = $6,000.

What is Cap Rate vs Cash-on-Cash Return?

Cap Rate (Capitalization Rate) = Net Operating Income / Purchase Price. It measures property ROI ignoring financing. Cash-on-Cash Return = Annual Cash Flow / Total Cash Invested. It measures return on actual cash invested (down payment + closing costs). Cap Rate is for property comparison; Cash-on-Cash is for investment return.

What is a good Cap Rate?

Class A properties (new, premium): 4-6%. Class B (average): 6-8%. Class C (older, need work): 8-12%. Higher cap rates mean higher returns but usually higher risk. Compare to similar properties in the same market. Cap rates vary by city: NYC/SF ~3-5%, Midwest ~8-12%.

What is a good Cash-on-Cash Return?

Excellent: 12%+. Good: 8-12%. Acceptable: 6-8%. Below 6% may not be worth the effort vs. stock market. Cash-on-Cash considers financing leverage - a 20% down payment with 8% cap rate can yield 20%+ cash-on-cash returns due to leverage magnifying returns.

Why do Cap Rate and Cash-on-Cash differ?

Cap Rate ignores financing (all-cash purchase scenario). Cash-on-Cash includes loan payments, so it reflects actual investor returns. Example: $300k property, $24k NOI = 8% Cap Rate. With 25% down ($75k) and $1,200/mo loan payment, cash flow = $24k - $14.4k = $9.6k. Cash-on-Cash = $9.6k / $90k (with closing) = 10.7%. Leverage increased return.