Finance / Real Estate Asset Yield Engine

Cap Rate & Rental Yield Calculator — DCF, IRR, DSCR

Evaluate a rental property's cap rate, DCF value, cash-on-cash return, DSCR, and IRR from NOI, growth, exit cap rate, leverage, and financing inputs.

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ZORVLABS · REAL ESTATE YIELD

Real Estate Asset Yield Engine

Real estate valuation with cap-rate analysis, DCF, levered and unlevered yield, cash-on-cash, DSCR, and price / cap-rate / NOI surfaces.

Numerical Integrity

analytic + IRR

Direct cap, Gordon terminal, and bisection IRR.

Asset value

$13.03M

DCF / PV valuation

Cap-rate value

$13.20M

NOI / exit cap

Cap rate

6.60%

NOI / price

Unlevered yield

6.20%

NOI less capex

View mode

3D surface

Valuation mode

Purchase price

Initial NOI

Rent growth

Expense growth

Capex ratio

Holding years

Exit cap rate

Discount rate

Target LTV

Debt rate

Amortization years

Tax rate

Terminal growth

Equity

$4.38M

Purchase less debt

Debt

$8.13M

LTV financed portion

DSCR

1.138x

NOI / debt service

IRR

-10.23%

Levered equity IRR

Cash-on-cash

2.15%

Year-1 levered yield

Levered yield

2.15%

Pre-tax levered CF / equity

Unlevered IRR

-5.54%

Project IRR

Payback

—

Unlevered cumulative CF

Cap rate: R = NOI / Price · PV = Σ CF_t / (1+Y)^t · TV_n = NOI_{n+1} / R_exit.

Yield vs cap rate: NCREIF and Appraisal Institute both distinguish simple cap-rate math from yield / DCF because cap rate uses year-1 NOI / price and yield incorporates later-period cash flows and reversion.

Source note: This engine follows Appraisal Institute yield-capitalization and DCF formulas, and NCREIF’s NOI / cap-rate definitions, with capex excluded from the simple cap-rate numerator but included in levered and unlevered cash flow.

2D NOI / cash flow curve

Projected property income, unlevered cash flow, and levered cash flow

2D cap-rate / price line

Higher cap rates imply lower values for the same NOI

3D surface

Value surface over NOI and cap rate

Cash-flow table

Annual operating, financing, and present-value breakdown

Year	NOI	Capex	Unlevered CF	Debt Service	Levered CF	PV Unlev.	PV Lev.	Cum. Unlev.	Cum. Lev.
1	$825.00K	$49.50K	$775.50K	$681.58K	$93.92K	$711.47K	$87.98K	-$11.72M	-$4.28M
2	$849.75K	$50.98K	$798.76K	$681.58K	$117.18K	$672.30K	$102.83K	-$10.93M	-$4.16M
3	$875.24K	$52.51K	$822.73K	$681.58K	$141.15K	$635.30K	$116.03K	-$10.10M	-$4.02M
4	$901.50K	$54.09K	$847.41K	$681.58K	$165.83K	$600.33K	$127.70K	-$9.26M	-$3.86M
5	$928.54K	$55.71K	$872.83K	$681.58K	$191.25K	$567.28K	$137.96K	-$8.38M	-$3.67M
6	$956.40K	$57.38K	$899.02K	$681.58K	$217.44K	$536.05K	$146.93K	-$7.48M	-$3.45M
7	$985.09K	$59.11K	$925.99K	$681.58K	$244.41K	$506.55K	$154.72K	-$6.56M	-$3.20M
8	$1.01M	$60.88K	$953.77K	$681.58K	$272.19K	$478.66K	$161.41K	-$5.60M	-$2.93M
9	$1.05M	$62.71K	$982.38K	$681.58K	$300.80K	$452.32K	$167.10K	-$4.62M	-$2.63M
10	$1.08M	$64.59K	$1.01M	$681.58K	$330.27K	$427.42K	$171.87K	-$3.61M	-$2.30M

Source equations

Appraisal Institute / NCREIF income-capitalization conventions

Cap rate / direct capitalization: RO = Year-1 NOI / Price.

DCF present value: PV = CF1/(1+Y)^1 + CF2/(1+Y)^2 + … + CFn/(1+Y)^n.

Basic cap / yield relation: R = Y − Δa, so Y = R + Δa.

Terminal value: TV_n = NOI_{n+1}/R_exit for direct cap, or Gordon growth when discount > growth.

NCREIF convention: income return uses NOI and excludes capex from the income side, while capex is subtracted from capital return.

Formula string: NOI / Price = Cap Rate · PV = Σ CF_t/(1+Y)^t · TV_n = NOI_{n+1}/R_exit

finance methodology

A clear path from inputs to results.

Price an income property the way investors do: from its net operating income. Enter a purchase price, Year-1 NOI, growth, capex, financing, and an exit cap rate, and the engine returns cap rate, DCF value, debt-service coverage, cash-on-cash return, and levered and unlevered IRRs for your entire holding period.

Step-by-step methodWorked exampleAssumptions explained

How to use

Set the purchase price and Year-1 net operating income (NOI); their ratio is the going-in cap rate shown in the header.
Choose the rent growth rate, the capex ratio (replacements as a share of NOI), and a holding period of 1 to 30 years.
Set the exit cap rate and discount rate — the exit cap drives terminal value, while the discount rate discounts each year's cash flow.
Add financing with target LTV, debt rate, and amortization years to get annual debt service, DSCR, cash-on-cash return, and the levered IRR.
Pick a valuation mode — direct cap, DCF, or mixed (an even blend of the direct-cap and Gordon-growth terminal values) — for the headline asset value.
Review the year-by-year cash-flow table and the 3D value surface to see how sensitive the property is to your NOI and cap-rate assumptions.

The formula

R_0 = \frac{\text{NOI}_1}{V_0}, \qquad PV = \sum_{t=1}^{n}\frac{CF_t}{(1+Y)^{t}} + \frac{TV_n}{(1+Y)^{n}}, \quad TV_n = \frac{\text{NOI}_{n+1}}{R_{\text{exit}}}

Reference: Appraisal Institute yield-capitalization and DCF conventions (The Appraisal of Real Estate); NCREIF definitions of NOI and cap rate; Gordon-growth alternative for terminal value.

Worked example

Income property bought at a 6.6% cap rate

Inputs

Purchase price $12,500,000; Year-1 NOI $825,000; rent growth 3%/yr; capex 6% of NOI; 10-year hold; exit cap rate 6.25%; discount rate 9%; 65% LTV at 6.75% with 25-year amortization.

Calculation path

1
The going-in cap rate is $825,000 ÷ $12,500,000 = 6.60%. Debt is 65% × $12,500,000 = $8,125,000 and equity is $4,375,000; annual debt service on the annual-payment annuity is $681,581.16. Year-1 capex is 6% × $825,000 = $49,500, leaving unlevered cash flow of $775,500, so DSCR is $775,500 ÷ $681,581.16 = 1.14x and Year-1 cash-on-cash is ($775,500 − $681,581.16) ÷ $4,375,000 = 2.15%. Discounting the ten growing cash flows at 9% and blending the direct-cap terminal value ($825,000 × 1.03^10 ÷ 0.0625 = $17,739,696) with the Gordon-growth terminal gives a mixed DCF value of about $13,027,074.

Result

Cap rate 6.60%; DSCR 1.14x; cash-on-cash 2.15%; mixed DCF value about $13.03 million versus the $12.5 million price; terminal value at exit $17.74 million.

Interpreting the result

Cap rate is the quick read — 6.60% here — while the DCF asks whether later cash flows and the exit value justify today's price. In this example the model's blended value of about $13.03 million sits slightly above the $12.5 million purchase price, and the 1.14x DSCR means operations cover the loan with a thin margin. Cash-on-cash starts low because early debt service is interest-heavy, then climbs as NOI grows against a fixed debt payment.

Assumptions & limitations

Everything is annual: NOI compounds at the single growth-rate input, and debt service is a level annual-payment annuity rather than a monthly amortization schedule.
The separate expense-growth slider does not feed the current engine; NOI growth is governed by the rent-growth input alone.
Results are pre-tax: the tax-rate input is not applied, and selling costs are not deducted from terminal value.
The reported levered and unlevered IRRs cover holding-period cash flows only and exclude sale proceeds; the equity multiple, by contrast, adds the undiscounted terminal value.
Capex is modeled as a flat percentage of each year's NOI — excluded from the simple cap rate but deducted from cash flows and DSCR.

Frequently asked questions

What is the difference between cap rate and cash-on-cash return?

Cap rate measures the property, not the buyer: Year-1 NOI divided by price with no financing — 6.60% in the worked example. Cash-on-cash divides Year-1 cash flow after capex and debt service by your equity, which is 2.15% here because the 6.75% debt rate exceeds the 6.60% cap rate, so leverage subtracts from early cash flow. Depending on that spread, leverage can push cash-on-cash above or below the cap rate.

Why doesn't the tax-rate slider change any results?

The current engine is deliberately pre-tax: the input is accepted but not applied, so every figure holds before income taxes. After-tax returns would depend on depreciation, your tax bracket, and the treatment of deductions, which vary too much from one owner to the next to hard-code.

Why are the IRRs negative when the deal looks fine?

The engine's unlevered and levered IRRs count only the cash flows during the holding period — they exclude sale proceeds, which are reported separately as terminal value and inside the equity multiple. On a $12.5 million purchase, ten years of operating cash flows alone do not return the capital, so the holding-period IRR is negative even though the total economics including exit are positive.

How does the exit cap rate change the valuation?

Terminal value equals the year after exit's NOI divided by the exit cap: at the defaults, $825,000 × 1.03^10 ÷ 0.0625 = $17,739,696. The relationship is one-for-one — capitalizing at 6.0% instead of 6.25% raises that figure by about $739,154. Small exit-cap changes swing the answer because the terminal value is by far the largest single component of DCF value.

What does this example's DSCR mean?

DSCR is NOI after capex divided by annual debt service: $775,500 ÷ $681,581.16 = 1.14x here. Above 1.0x, operations cover the loan payment; below 1.0x, the property must draw on reserves or outside cash to service the debt. A thin cushion like 1.14x is sensitive to any NOI shortfall.

Is the model's DCF value the price I should pay?

Treat it as a benchmark, not an appraisal. At the defaults the blended value is about $13.03 million against a $12.5 million price, implying you are paying slightly less than the model's worth; move the discount rate, growth, or exit cap and the gap moves with them. The value surface shows how quickly that verdict flips as assumptions change.

Methodology last reviewed 2026-10-06. Results are informational and not financial or engineering advice — see our disclaimer.