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Rental Property Cap Rate & Cash-on-Cash Return Calculator

Calculate a rental property's net operating income, cap rate, cash flow, and cash-on-cash return from its price, rent, expenses, and financing.

Net operating income (NOI)
$16,000/yr
Cap rate
8%
Annual cash flow (after debt service)
$4,000/yr
Cash-on-cash return
8%
Gross rent multiplier
8.33x

How it works

Net operating income (NOI) is the property's annual rent minus its operating expenses (maintenance, property taxes, insurance, vacancy, management — everything except the mortgage): NOI = annual gross rent − annual operating expenses. This is the standard real-estate-investing convention for measuring a property's own performance independent of how it happens to be financed.

Cap rate is NOI as a percentage of purchase price — the return the property would earn if bought entirely in cash: cap rate = NOI ÷ purchase price. Cash-on-cash return instead measures what a leveraged buyer actually experiences: annual cash flow (NOI minus mortgage payments) divided by the cash actually put in, not the full purchase price. A gross rent multiplier (purchase price ÷ annual gross rent) is also shown as a quick secondary screening ratio.

FAQ

Why are cap rate and cash-on-cash return usually different numbers?

Cap rate ignores financing entirely — it's what the property earns on its own. Cash-on-cash return only measures the return on the cash actually invested, so leverage (borrowing most of the purchase price) can make cash-on-cash return higher or lower than the cap rate depending on whether the mortgage rate is below or above the property's own return.

What should I enter as 'annual mortgage payments' if I paid all cash?

Enter 0 — with no debt service, annual cash flow equals NOI exactly, and cash-on-cash return becomes NOI divided by the full purchase price (since that's what was actually invested), which will equal the cap rate in that case.

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