The difference between a 5% cap rate and a 7% cap rate on a $200K property is $4,000 per year in NOI. That is $333/month. Real money.
But here is what nobody tells you about comparing: cap rate alone does not tell you if the deal works. A 7% cap rate with 9% vacancy and rising insurance can produce negative cash flow. A 5% cap rate in a tight market with 4% vacancy might actually cash flow better after financing.
The numbers I check on every deal:
- Cap rate — is the property earning enough relative to price?
- Cash flow — can I cover the mortgage and still eat?
- DSCR — will a lender actually fund this?
- Total ROI — what do I make over 5-10 years including equity?
Four numbers. Two minutes each. That is the entire analysis.
Free calculators I use for all of this:
- NOI Calculator — net operating income breakdown
- Hard Money Calculator — hard money loan costs
- Cash-on-Cash Calculator — return on actual cash invested
- Depreciation Calculator — annual tax deduction
- ARV Calculator — after repair value from comps
Everything at arvcalc.com. No signup, no paywall.
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