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Cap rate, cash-on-cash return, NOI and IRR on any rental property — plus year-by-year cash flow, appreciation and equity buildup.
| Year | Property Value | Loan Balance | Equity | Annual Cash Flow | Cumulative Cash Flow | Total Return |
|---|---|---|---|---|---|---|
| 1 | $360,500 | $277,156 | $83,344 | $-8,486 | $-8,486 | $-75,642 |
| 2 | $371,315 | $274,106 | $97,209 | $-8,486 | $-16,972 | $-70,263 |
| 3 | $382,454 | $270,835 | $111,619 | $-8,486 | $-25,458 | $-64,340 |
| 4 | $393,928 | $267,329 | $126,599 | $-8,486 | $-33,945 | $-57,845 |
| 5 | $405,746 | $263,568 | $142,177 | $-8,486 | $-42,431 | $-50,753 |
| 6 | $417,918 | $259,536 | $158,382 | $-8,486 | $-50,917 | $-43,035 |
| 7 | $430,456 | $255,213 | $175,243 | $-8,486 | $-59,403 | $-34,660 |
| 8 | $443,370 | $250,577 | $192,793 | $-8,486 | $-67,889 | $-25,596 |
| 9 | $456,671 | $245,605 | $211,065 | $-8,486 | $-76,375 | $-15,810 |
| 10 | $470,371 | $240,275 | $230,096 | $-8,486 | $-84,862 | $-5,266 |
Four numbers get called "the return" on a rental property and they answer different questions. A listing advertising a 12% return is almost never quoting the same measure a lender or an accountant would.
NOI (net operating income)
gross rent − vacancy − operating expenses
Excludes the mortgage entirely. This is the property's own earning power, before any decision you make about financing — which is exactly why lenders start here.
Cap rate
NOI ÷ purchase price
The unlevered yield. Comparable across properties because it ignores your loan, so it answers “is this asset priced fairly” rather than “will this work for me”.
Cash-on-cash return
annual pre-tax cash flow ÷ total cash invested
The levered yield, and usually the number an investor actually feels. Leverage can push it well above the cap rate — and well below it when the property is negatively geared.
IRR (internal rate of return)
the discount rate at which all future cash flows plus sale proceeds net to zero
The only one of the four that accounts for TIME and for the eventual sale. A high cap rate with no appreciation can produce a worse IRR than a low one in a growing market.
Two habits worth keeping. Always ask which measure a quoted return refers to, and whether vacancy and maintenance were deducted before it — omitting them is the most common way an advertised yield flatters a property. And treat cap rate and cash-on-cash as answering different questions rather than competing: the first prices the asset, the second prices your position in it.
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They measure different things and neither replaces the other. Cap rate is unlevered: net operating income divided by property value, ignoring your mortgage entirely, which is what makes it the right tool for comparing properties against each other and against a market benchmark. Everything on this page is levered — cash-on-cash, IRR and equity buildup all depend on your financing, which is what makes them the right tools for judging a deal you would actually sign.
A practical rule: screen with cap rate, decide with cash-on-cash and IRR. If you only want the unlevered yield and the NOI behind it, the cap rate calculator does that one job with market benchmarks attached.