The Metric That Ignores Your Wallet: Cap rate doesn't care how you pay. Formula: NOI / Property Value. Perfect for comparing properties of wildly different sizes and prices. The Cap Rate Spectrum: 3-4% in premium areas (appreciation play), 5-6% in solid neighborhoods, 7-8% sweet spot, 9-10% higher risk, 11%+ distressed areas. Cash-on-Cash: What YOUR Money Earns: Annual Pre-Tax Cash Flow / Total Cash Invested. A 7% cap rate deal can deliver 14% CoC return with smart financing. The Inverse Dance: When investors pile into a market, prices rise and cap rates compress. Rapidly compressing cap rates are a warning sign. Yield on Cost: For value-add investors: projected NOI after improvements / total cost. How professionals find deals in competitive markets.