How to Calculate Cash-on-Cash Return and Cap Rate on a Rental Property Spreadsheet

You’re staring at a rental property, or one you already own, and trying to answer a question that should be simple: is this actually a good investment? Someone tells you the cap rate. Someone else asks about cash-on-cash return. You nod along, but the truth is most landlords never fully sorted out what these two numbers measure — or why a property can look great on one and mediocre on the other.

Here’s the plain-English version, the formulas, and how to make a spreadsheet track them for you so you’re judging every property by the numbers instead of a gut feeling.

The Two Questions These Metrics Answer

Cap rate and cash-on-cash return sound interchangeable. They aren’t. They answer two different questions:

• Cap rate asks: how good is this property, ignoring how I paid for it?
• Cash-on-cash return asks: how good is this deal for the specific cash I put in?

That distinction is the whole game. A property with a modest cap rate can deliver a fantastic cash-on-cash return if you financed it well. A property with a great cap rate can deliver a weak cash-on-cash return if you overpaid in cash. You need both numbers because each is blind to what the other sees.

Cap Rate: The Property’s Own Return

Cap rate strips out financing so you can compare properties fairly.

Cap rate = Net Operating Income ÷ Property Value

Net operating income (NOI) is your annual rental income minus all operating expenses — insurance, property tax, maintenance, management, utilities you cover, vacancy allowance — but not the mortgage. Financing is deliberately excluded so two properties can be compared regardless of how each was bought.

Example: A property brings in $24,000 a year in rent. Operating expenses run $9,000. NOI is $15,000. If the property is worth $250,000, the cap rate is $15,000 ÷ $250,000 = 6%.

Because it ignores your loan, cap rate is the cleanest way to compare a $250,000 duplex against a $400,000 single-family — apples to apples.

Cash-on-Cash Return: The Return on Your Money

Cash-on-cash return brings financing back in, because it measures what you actually earn on the cash you actually spent.

Cash-on-cash return = Annual Pre-Tax Cash Flow ÷ Total Cash Invested

Annual pre-tax cash flow is NOI minus your mortgage payments. Total cash invested is your down payment plus closing costs plus any upfront rehab — the real money that left your pocket.

Example: Take the property above with $15,000 NOI. Say the mortgage costs $11,000 a year, leaving $4,000 in cash flow. If you put in $55,000 of cash (down payment, closing, initial repairs), your cash-on-cash return is $4,000 ÷ $55,000 = 7.3%.

Many rental investors aim for 8% to 12% cash-on-cash, but the right target depends on your market and what else you could do with the money. The point of tracking it is to measure against your goal and your other properties, not a one-size benchmark.

Why Both Matter More in 2026

Operating costs are squeezing landlord returns right now. Harvard’s Joint Center for Housing Studies found in its America’s Rental Housing 2026 report that most rental operating expenses have climbed 10–20% since 2019, with property insurance roughly doubling. When expenses rise, NOI falls — and both your cap rate and your cash-on-cash return fall with it, quietly, unless you’re watching. A property that penciled out at purchase can slide below your target return without a single dramatic event. The only way to catch it is to recalculate these numbers as your real expenses come in, not once at closing.

Let the Spreadsheet Do the Math

Both formulas are simple, but they depend on numbers that change every month — rents, an insurance hike, a vacancy, a repair. Calculating them by hand once a year defeats the purpose. The right approach is a spreadsheet where you enter income and expenses as they happen, and the cap rate and cash-on-cash return update automatically from the totals.

That’s exactly what the Rental Property Income & Expense Tracker from ReadySheetGo does. You enter each property’s purchase price, cash invested, and mortgage once in the setup tab, then log income and expenses monthly. The Annual Summary calculates NOI, cap rate, and cash-on-cash return for each property and for the whole portfolio — so you can rank properties by return and see instantly when one drops below your target.

From Gut Feel to Numbers

The landlords who build wealth aren’t the ones with the best instincts — they’re the ones who let the numbers decide. Cap rate tells you whether the property is sound. Cash-on-cash return tells you whether the deal is sound for your money. Track both, keep them current, and every buy, sell, refinance, and rent-increase decision gets easier because it’s answered by math instead of hope.

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