The Cap Rate of a Property, Cash on Cash Return

The cap rate is independent of the buyer and financing, making this calculation the most pure indicator of a property's potential return. If you're getting less than ten % return on a property, it's probably not worth your investment. Consider investing that cash in the stock market instead. Keep in mind that our realestate invest analysis only covers the first year of property ownership. In subsequent years, a crude annual equity increases, expenses rise with inflation, rental rates increase or decrease, and tax situations change.