Understanding Common Return Metrics
What is gross yield?
Gross yield is the estimated annual rent expressed as a percentage of the property’s purchase price.
Formula: (Estimated Annual Rent ÷ Purchase Price) × 100
Use case: A quick way to compare the income potential of properties before accounting for expenses.
What is cap rate?
Cap rate (capitalization rate) is the estimated annual net operating income (NOI) as a percentage of the property’s purchase price.
Formula: (Net Operating Income ÷ Purchase Price) × 100
Use case: Helps compare profitability between properties by factoring in expenses before debt service.
What is cash-on-cash return?
Cash-on-cash return measures your net annual cash flow as a percentage of your total cash invested (usually the down payment).
Formula: (Annual Net Operating Income – Annual Mortgage Payment) ÷ Down Payment × 100
Use case: Useful for understanding returns on financed purchases.
What is estimated net cash flow?
Estimated net cash flow is the cash left over from the property's net operating income after paying your mortgage.
Formula: Net Operating Income – Annual Mortgage Payment
Use case: Gives a real-world picture of the money you’ll actually keep each year.
Why do some properties show dashes for gross yield, cap rate, or cash-on-cash?
We only display gross yield, cap rate, and cash-on-cash when we have enough confidence in the underlying assumptions. If our estimates for rent, taxes, or insurance fall below our confidence threshold, those metrics appear as dashes (—).
This means you’re working with quality default assumptions for your underwriting, rather than unreliable numbers. No system is perfect, but we’d rather withhold a metric than show you something misleading.
You can always enter your own assumptions on the property details page to calculate gross yield, cap rate, and cash-on-cash based on your inputs.
Financial Inputs & Assumptions
Where does the estimated rent value come from?
The default estimated rent is based on publicly available data. It’s not a guarantee or prediction of future rental income.
What assumptions are used for the mortgage payment?
The annual mortgage payment is based on a 30-year fixed-rate, fully amortizing loan. It includes both principal and interest.
What is the vacancy assumption?
The vacancy assumption is an estimated percentage of time the property may be unoccupied and not generating rental income. It helps model realistic rental income by accounting for potential gaps between tenants.
Where does the property tax estimate come from?
The property tax value comes from the most recent public record of the property’s annual tax amount. The actual property taxes due may change materially in the future due to factors like the purchase price, recent sales comps, the assessment process, and local tax changes.
Where does the insurance estimate come from?
The insurance value is based on a quote from one of Roofstock’s third-party insurance providers.
What is the "Reserve" line item?
Reserve is an optional line item you can use for additional anticipated costs, such as:
Maintenance and repairs
Tenant turnover
Owner-paid utilities that won’t be reimbursed
Miscellaneous or unexpected expenses
Neighborhood & Local Data
What is a Neighborhood Score?
The Neighborhood Score is Roofstock’s proprietary rating of a neighborhood's investment potential. It considers factors like:
School quality
Employment trends
Median home values
Overall investment appeal
What is a School Score?
The School Score is a 1–10 rating of local school quality from GreatSchools.org. Higher scores indicate higher academic achievement and/or higher satisfaction among students and parents.
What is a Crime Score?
The Crime Score is a Roofstock-specific metric based on reported crime data. Lower scores indicate lower reported crime rates in the area.