How to read this: Cap-rate ceiling divides annual NOI by your target cap rate. Cash-on-cash ceiling solves for the price at which estimated annual cash flow after fixed-rate principal-and-interest payments reaches your target, divided by estimated down payment, closing costs, and upfront costs. Taxes, financing terms, and lender calculations can differ.
Example: If annual NOI is $16,500 and your target cap rate is 7%, the cap-rate ceiling is about $235,714. With a 75% LTV loan at 7% over 30 years, 3% closing costs, $10,000 upfront costs, and an 8% cash-on-cash target, the cash-on-cash ceiling is about $177,000. These two methods use different assumptions and can yield different price limits.
Planning estimates only. Cap-rate and cash-on-cash targets are investor-selected assumptions, not recommended returns. Loan amortization is modeled as a fixed-rate, fully amortizing loan. Estimates exclude taxes on income, capital projects not entered, and other transaction-specific costs. This tool does not determine fair value, lender approval, or investment suitability; verify assumptions with qualified professionals.