Investors use simple ratios to compare properties.
Cap rate
Net operating income (rent minus operating expenses, before the mortgage) divided by the price. It ignores financing.
Cash-on-cash return
Yearly cash flow after the mortgage, divided by the cash you put in: down payment, closing costs and repairs.
Use real expenses
Include taxes, insurance, vacancy, repairs, capital reserves and management, even if you manage it yourself.
Our rental return calculator shows both.
General information, not legal, tax or financial advice.
This article is general information, not legal, tax or regulatory advice. Rules change; confirm current requirements with the responsible agency or a licensed professional.
