Gross yield compares market rent with market value
The numerator is one year of rent. The denominator is the home value or acquisition price. At market level, RentMarker uses current Zillow ZORI and ZHVI and checks that monthly rent multiplied by twelve, divided by value, reproduces the displayed ratio. This is deliberately simple. It is fast enough to compare hundreds of metros with one definition.
That simplicity also defines the boundary. Gross yield has no property tax, insurance, repairs, vacancy, utilities paid by the owner, management, association dues or capital expenditure. It has no mortgage rate, down payment or closing cost. A market with a high ratio may still contain poor deals once those missing obligations are attached to a specific property.
What the market evidence can—and cannot—fill
The second row is the surviving metro closest to the current median, not a hand-picked hypothetical.
| Market | Home value | Monthly rent | Gross yield | Cap rate | Cash-on-cash |
|---|---|---|---|---|---|
| Kingsville, TX | $148,688 | $1,426 | 11.5% | n/aproperty expenses missing | n/adeal financing missing |
| Juneau, AK | $483,570 | $2,343 | 5.8% | n/aproperty expenses missing | n/adeal financing missing |
Cap rate begins only after net operating income exists
Cap rate replaces broad annual rent with net operating income. The calculation needs a property’s effective rental income and recurring operating expenses before financing. It therefore belongs after a buyer has a plausible unit rent, tax bill, insurance quote, vacancy allowance, management choice and maintenance or reserve policy.
Debt service is normally excluded from net operating income. That is why cap rate can compare the operating economics of two properties without letting different loan structures dominate the result. It is still not a complete return forecast: major rehabilitation, future resale value, income tax and an investor’s required return sit outside the basic measure.
RentMarker does not backfill those missing property inputs with a national percentage. Insurance and taxes vary too much by location and property; repairs and management depend on the asset and operating plan. The honest market-level cap rate is therefore “n/a,” not gross yield with a new label.
Cash-on-cash return changes when the capital stack changes
Cash-on-cash return compares annual pre-tax cash flow with the cash actually invested. It adds the mortgage payment and cash-to-close decision to the property operations already needed for cap rate. Two buyers can purchase the same property at the same price and have the same cap rate while recording different cash-on-cash returns because their down payments, interest rates, points or rehabilitation budgets differ.
Leverage can raise the ratio when the property return comfortably exceeds the cost of debt. It can also amplify a thin margin and turn a small operating miss into negative cash flow. That is why the financing measure belongs last in the stack, after the rent and recurring costs can withstand a downside case.
Use all three without asking one to do another’s job
- 1Screen markets with gross yield.
Use one definition to shrink the search, then inspect jobs, supply, migration and risk.
- 2Model property operations with cap rate.
Replace market rent and value with unit evidence, actual price and explicit expenses.
- 3Test financing with cash-on-cash return.
Add debt service and every dollar required to acquire and stabilize the deal.