Quickly evaluate real estate investment profitability with our Cap Rate and Cash-on-Cash Return Calculator. Analyze potential rental properties to understand their annual return and cash flow against your equity. Make smarter investment decisions today!
Formula:
The Cap Rate (Capitalization Rate) and Cash-on-Cash Return are key metrics for real estate investment analysis.
- Net Operating Income (NOI) = (Gross Rental Income + Other Income) - Operating Expenses
- Annual Pre-Tax Cash Flow = NOI - Annual Mortgage Payments
- Total Cash Invested = Down Payment + Closing Costs + Initial Repairs/Renovations
- Cap Rate = (Annual NOI / Property Value) × 100
- Cash-on-Cash Return = (Annual Pre-Tax Cash Flow / Total Cash Invested) × 100
Where:
- Gross Rental Income: Total rent collected from the property.
- Other Income: Additional income like laundry, parking fees.
- Operating Expenses: Property taxes, insurance, HOA fees, utilities (owner-paid), vacancy loss, property management fees, maintenance.
- Property Value: The purchase price of the property.
- Annual Mortgage Payments: Total mortgage payments made over a year.
- Down Payment: The initial upfront cash payment for the property.
- Closing Costs: Fees and expenses incurred during property transaction.
- Initial Repairs/Renovations: Upfront costs to make the property ready for rent.