Cash-on-Cash vs Cap Rate
Cap rate and cash-on-cash both express return as a percentage — but they answer different questions. Cap rate says how the property performs before financing; cash-on-cash says how your equity performs after it. Enter the four numbers below and see both, plus the leverage verdict.
The key difference
Cap rate is a property metric: it is independent of who buys or how they finance, which makes it the right tool for comparing deals and tracking market pricing.
Cash-on-cash is an investor metric: same property, different loans, different results. When cap rate > loan constant, leverage is positive and CoC beats cap rate; when the loan constant is higher, leverage is negative and cash-on-cash falls below the cap rate.
Frequently asked questions
Which one matters more?
Use cap rate to shop and compare; use cash-on-cash to commit. A deal only works if both make sense — a 7% cap rate financed at a 9% effective constant loses money every month.
Can cash-on-cash be higher than cap rate?
Yes — whenever your mortgage's debt constant is below the cap rate (positive leverage), financing amplifies returns on your equity.
Related tools
- Metric definitions: standard real-estate finance. Leverage relationship: debt-constant vs cap-rate comparison.
Last updated: 2026-09-08