Evaluating a Rental Property
Cap rate, cash-on-cash, NOI, and GRM each answer a different question. The metrics that separate a deal from a dud.
Last updated: 2026-07-20
Real-estate investors lean on a handful of ratios to size up a rental quickly and compare properties on equal footing. Each one answers a slightly different question.
Start with NOI
Net operating income is the property's income after vacancy and operating expenses, before any mortgage. It's the foundation for most other metrics because it reflects the property's own performance, independent of how you finance it.
The key ratios
- Cap rate — NOI divided by price; the unleveraged yield, best for comparing properties.
- Cash-on-cash return — annual cash flow divided by the cash you actually invested; reflects your financing.
- Gross rent multiplier — price divided by gross annual rent; a fast first-glance screen.
Don't forget vacancy and expenses
Optimistic numbers sink more real-estate deals than bad ones. Budget realistically for vacancy, maintenance, management, and capital expenses — a property that looks great before expenses can lose money after them. Run the numbers with the calculators below.