The four numbers that decide a rental
Each one answers a different question, and each one hides something the others catch. Every figure below is computed by Caprately's engine on the same example deal, so you can see how they disagree.
Cap rate
7.8%On the example deal
Cap rate is a property's annual net operating income divided by its purchase price — the yield the building throws off before any financing.
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DSCR
1.34xOn the example deal
DSCR is net operating income divided by debt service — how many times over the property's income covers its loan payment.
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Cash-on-cash return
7.2%On the example deal
Cash-on-cash return is a year of cash flow divided by the cash you actually put in — down payment, closing costs, and rehab.
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The 1% rule
1.0%On the example deal
The 1% rule says a rental should collect at least 1% of its purchase price in monthly rent — a screen, not an analysis.
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