Metrics

Cap Rate: the unlevered yield

Updated 2026-07-02

Cap rate is the return a property throws off if you paid all cash: its yield with financing stripped out. Because it ignores your loan, it's the cleanest way to compare two deals, and it's how buyers will price the property when you sell.

Cap Rate = Net Operating Income ÷ Price (or Value)

NOI is income after operating expenses, before the mortgage. Price is what you pay (or the property's value).

Try it

Annual NOI

Price

Cap rate

Target ranges

Good

≥ 8%

Workable

5 to 8%

Below

< 5%

"Good" is market-dependent: a 6% cap in a strong metro can beat an 8% cap in a shrinking town. Tune these in your buy box, and compare with DSCR and cash-on-cash.

What is DSCR, and why do lenders care?

DSCR measures whether a property earns enough to cover its own mortgage. It's the number lenders use to decide whether (and how much) they'll lend.

Cash-on-Cash Return, explained

Cash-on-cash is the return on the actual dollars you put into a deal: the first number most investors look at.