Rental Property Calculator (Cap Rate & Cash-on-Cash)

Capitalization rate (cap rate) measures a property's unleveraged return. It's the annual Net Operating Income (rent minus operating expenses, excluding the mortgage) divided by the purchase price. A $300,000 property with $18,000 NOI has a 6% cap rate. It lets you compare properties regardless of financing.

Cash-on-cash return is your annual pre-tax cash flow divided by the actual cash you invested (down payment plus closing costs). Unlike cap rate, it accounts for your mortgage, so it reflects the real return on the money you put in. It's a favorite metric of leveraged investors.

It depends on the market and risk. Many investors look for cap rates in the 5–10% range and cash-on-cash returns of 8% or higher, but lower-risk markets often have lower cap rates. Compare against local alternatives and your return requirements.

Operating expenses include property taxes, insurance, maintenance and repairs, property management, HOA fees, utilities you pay, and a vacancy allowance. They do NOT include the mortgage payment — that's financing, which is handled separately in the cash flow calculation.

Cap rate ignores financing and shows the property's return as if you paid all cash. Cash-on-cash return includes your mortgage and is based only on the cash you actually invested. With favorable leverage, cash-on-cash can exceed the cap rate.

No. Cap rate is intentionally financing-neutral so two investors with different loans can compare the same property. The mortgage is included only in cash flow and cash-on-cash return, which measure your leveraged outcome.