Cap rate, DSCR and cash-on-cash are the same number
Hold the financing constant and cap rate, DSCR and cash-on-cash become exact rescalings of one another. Three metrics agreeing is not three pieces of evidence.
| Row | DSCR | Cap rate | Cash-on-cash |
|---|---|---|---|
| $2,400/mo rent | 1.082 | 6.27% | 1.76% |
| $2,700/mo rent | 1.250 | 7.24% | 5.36% |
| $3,000/mo rent | 1.418 | 8.21% | 8.97% |
| $3,300/mo rent | 1.586 | 9.18% | 12.57% |
| $3,600/mo rent | 1.754 | 10.16% | 16.17% |
Cap rate ÷ DSCR is 0.057896 in the first row and 0.057896 in the last. It does not move, because the two are the same number scaled by a constant.
The algebra
Fix the down payment percentage, the interest rate and the term. Then the mortgage payment is a constant times the price — call it k × price — and the cash invested is another constant times the price, m × price.
Cap rate is annual net operating income over price. DSCR is monthly NOI over the payment. Substitute the payment and you get cap rate = 12k × DSCR. The two are the same quantity with a different scale factor.
Cash-on-cash is annual cash flow over cash invested, and cash flow is NOI minus debt service. Substitute again and you get cash-on-cash = (12k / m) × (DSCR − 1). Also linear in DSCR. Also, therefore, the same information.
This is not an approximation that holds most of the time. For a given financing it is exact, which is why the ratio between any two of them stays fixed no matter what you do to rent or price.
Why it matters
Because a dashboard showing four green metrics reads as four independent confirmations, and it isn't one. If your cap rate looks healthy, your DSCR and cash-on-cash were always going to look healthy too. They cannot disagree with each other, so their agreement carries no information.
This is the reason there is no 0-100 deal score on this site. A composite that weights cap rate, DSCR and cash-on-cash separately — 25 points here, 15 points there — presents one number as a balanced portfolio of five signals. Making the weights visible does not fix it. It just documents the double-counting.
What does add information is a metric that measures something structurally different. Break-even occupancy asks how much vacancy the property survives. IRR asks what the timing of the money is worth. Both can disagree with cash flow. Cap rate cannot.
So which one should you use
Use the one whose threshold means something to you. DSCR if you are borrowing, because it is the number the lender screens on and 1.20x is a real gate you either clear or don't. Cash-on-cash if you are comparing against an index fund, because it is denominated in the thing you actually gave up.
Cap rate is the odd one out in practice, not because the algebra differs but because it is usually quoted without leverage, which makes it useful for comparing properties to each other and useless for telling you whether you can afford one.
And then look at something independent. The screen on this site checks four criteria, and cap rate is deliberately not one of them.
What this doesn’t show. The equivalence holds for a fixed down payment, rate and term. Compare two deals with different financing and the three metrics genuinely do diverge — that is the one case where looking at all three earns its keep.
Run it on a property you’re looking at
Two numbers and the same engine that produced the table above returns the verdict, the tightest constraint, and the price that would make it work.