Two rental returns answer two different questions. Use both.
Take the mortgage out, then put it back
Cap rate is net operating income divided by price. Operating income is rent minus expenses such as tax, insurance, repairs, vacancy, and management. The mortgage is not an operating expense. That is why two buyers can see the same cap rate and very different cash flow.
Cash-on-cash divides the cash left after debt service by the cash you invested. A pretty cap rate with expensive financing can still leave little cash. The real estate calculator shows both on one screen.
Run the same question with your figures
Cap Rate Ignores the Loan. Cash-on-Cash Does Not. points to the Real Estate Calculator because the note is about cap rate and cash-on-cash from rent and expenses. The form on that page asks for Purchase price ($350,000.00), Monthly rent ($2,400.00), Yearly operating expenses ($9,000.00), Down payment ($70,000.00), Loan rate (7%). Its opening example produces Cap rate is 5.66%. Use the article to see which piece of the payment, the tax, or the balance the heading is talking about. Use the calculator when you want the same relationship with your own inputs. The two pages are not copies of each other.
Cap Rate Ignores the Loan. Cash-on-Cash Does Not. points to the Rental Property Calculator because the note is about cash flow now and equity at the end of the hold. The form on that page asks for Purchase price ($400,000.00), Monthly rent ($2,800.00), Yearly operating expenses ($11,000.00), Down payment ($80,000.00), Loan rate (6.80%). Its opening example produces Cap rate is 5.65%. Use the article to see which piece of the payment, the tax, or the balance the heading is talking about. Use the calculator when you want the same relationship with your own inputs. The two pages are not copies of each other.
How to read this note
Cap Rate Ignores the Loan. Cash-on-Cash Does Not. is one question, not a plan for every account you own. The opening claim is this: Two rental returns answer two different questions. Use both. The sections above stay on that claim. They use a worked figure so the relationship is visible. A worked figure is not a prediction that your loan, your fund, or your tax year will match it.
Read the headings in order. Take the mortgage out, then put it back. If a sentence names a calculator, that link is the place to change the inputs. If a sentence names a limit, the limit is the one published for the year written on the page, which is 2026 where this desk cites a retirement or tax figure.
A senior reading of a finance page looks for three things. The formula should match the labels. The example should be reproducible on the calculator. The page should say what it leaves out. This note tries to do those three. It does not tell you to borrow, to sell, to contribute the maximum, or to file a return from the illustration.
What the note leaves out
Cap Rate Ignores the Loan. Cash-on-Cash Does Not. ignores facts it does not mention. Fees, state tax, a credit score, an employer match you have not typed, and a market that refuses to pay a flat rate are all outside the paragraph. When one of those facts is the actual question, open the calculator that asks for it or read the disclaimer before you move money.
Published 25 Oct 2026. If a public figure in the note is later revised by the IRS, a lender, or a data source, the calculator page and the methodology are the places this desk updates. The note does not store what you type, and it is not a message from a broker or a tax preparer.
Before you treat the example as yours
Cap Rate Ignores the Loan. Cash-on-Cash Does Not. uses a specific illustration so the relationship is easy to see. The category is Home & Mortgage. The tools sitting next to the note are Real Estate Calculator, Rental Property Calculator. Open one of them, replace the example, and press Calculate if the decision in front of you depends on your balance, your rate, or your income. The article does not update itself when those facts change.
A careful reading checks three matches. The heading should be the question you have. The worked number should use inputs you can point to. The omitted items, named above, should be irrelevant or added back in a field. If any of the three fails, do not stretch the conclusion. Two rental returns answer two different questions. Use both.
Keep the note and the calculator apart in your notes. The note explains why the pieces move. The calculator shows how far they move once you type them. Publishing date 25 Oct 2026 is the version of the explanation you are reading. Public limits can change after that date, and the methodology is where this desk records the figures it is willing to stand behind.
FAQs
Should I include vacancy?
Yes. A building is not full every day. Leaving vacancy out of expenses inflates the cap rate.
What is Cap Rate Ignores the Loan. Cash-on-Cash Does Not. actually deciding?
Two rental returns answer two different questions. Use both.
Where do I put my own numbers?
Open Real Estate Calculator or Rental Property Calculator. The article’s example is already explained. The calculator is the place to change the fields and press Calculate.
Does the example include every fee and tax?
Only the pieces the note names. Anything missing from the example is missing from the result. Add it in the matching field or treat the figure as incomplete.
Is this a recommendation?
No. Cap Rate Ignores the Loan. Cash-on-Cash Does Not. shows a relationship so you can see it. It is not advice to buy, sell, borrow, or contribute. The disclaimer states that limit in one place.