CALCULATION GUIDE
Cap Rate vs. Cash-on-Cash Return vs. IRR
Understand three returns that answer different property-investment questions.
Calculation approach
Cap rate measures property operations before financing. Cash-on-cash return compares annual cash flow with equity invested. IRR accounts for the timing of multiple cash flows and sale proceeds.
How to use the result
Use the metrics together: cap rate for property economics, cash-on-cash for near-term equity yield and IRR for the complete holding-period forecast.