What is cap rate?
Cap rate (capitalization rate) is Net Operating Income divided by property value. It measures return without considering financing. A 6-8% cap rate is typical for residential rentals.
What is cash-on-cash return?
Cash-on-cash return is annual cash flow divided by total cash invested. It measures the return on your actual out-of-pocket investment, accounting for mortgage leverage.
What vacancy rate should I use?
5-8% is typical for well-located properties. Use 10%+ for less desirable areas or if you're being conservative. Check local rental market data for accuracy.
What growth rates are realistic?
Historically, US home prices appreciate 3-4% annually, rents grow 2-4%, and expenses inflate 2-3%. Use local market data for more accurate projections.