Cap Rate Calculator (With Mortgage)
A plain cap rate ignores financing — but almost nobody buys property with cash. This tool adds the mortgage layer: enter the loan terms and see the cap rate alongside monthly payment, DSCR, annual cash flow and the levered cash-on-cash return.
Levered analysis: from cap rate to cash-on-cash
Cap rate stays unlevered (NOI ÷ value). The mortgage layer converts it into equity performance: annual debt service reduces NOI to cash flow, and cash-on-cash divides that cash flow by your invested cash (approximated here as value − loan amount).
DSCR (debt service coverage ratio) = NOI ÷ annual debt service. Most US lenders want at least 1.20–1.25 on rental loans — below 1.0 means the property does not cover its own mortgage.
Frequently asked questions
What DSCR do lenders require?
Typically 1.20–1.25× for 1–4 unit investment property loans. Below 1.0 the property loses money on debt service and most lenders decline.
Why is my cash-on-cash different from the cap rate?
Positive leverage: if cap rate > mortgage constant, financing amplifies your return (CoC > cap rate). If the mortgage constant exceeds the cap rate, leverage hurts (negative leverage).
Related tools
- Amortization formula: standard fully-amortizing loan equation. DSCR norms: US investment-property lending practice, 2026.
Last updated: 2026-09-08