Cap Rate & Cash-on-Cash Return
Evaluate opportunities using cap rate (unlevered), yield on cost, and levered returns with simple financing.
Unlevered Metrics
NOI (annual)$45,000
Cap Rate (NOI ÷ Price)5.29%
Yield on Cost (NOI ÷ Project Cost)5.17%
Yield on Cost accounts for closing costs and initial renovations.
Debt Service & Coverage
Annual Debt Service (ADS)−$46,978
DSCR (NOI ÷ ADS)0.96
Debt Yield (NOI ÷ Loan)7.06%
Many lenders look for DSCR ≥ 1.20 and Debt Yield ≥ 8–10% (program-dependent).
Levered Returns
Levered Cash Flow (NOI − ADS)-$1,978
Cash Invested$232,500
Cash-on-Cash Return-0.85%
Assumptions & Notes
- NOI excludes debt service and income taxes; includes typical operating expenses.
- Cap Rate uses purchase price only. Yield on Cost uses price + closing + initial CapEx.
- Cash-on-Cash = (NOI − ADS) ÷ (Down + Closing + Initial CapEx).
- Estimates only; actual results vary with rents, expenses, and financing terms.