Cap rate, yield and cash-on-cash for vacation rentals
Plain-language definitions, when to use each metric in Tulum or Los Cabos, and how to avoid mixing gross yield with true investor return.
Gross yield QR
6–10%
Net cap rate
4–8%
Tool
ROI calculator
Developers quote yield. Banks care about cash-on-cash. Analysts talk cap rate. They are related — but not interchangeable.
Confusing these metrics is the #1 reason investors overpay in Tulum and Los Cabos. Learn the definitions once, then run every deal through the ROI calculator.
Key takeaways
- ✓Gross yield = rent ÷ price (before expenses).
- ✓Cap rate ≈ NOI ÷ value (after operating expenses).
- ✓Cash-on-cash = annual cash flow ÷ cash invested.
- ✓Use the ROI calculator for numbers — not this page alone.
Glossary
Three metrics, three questions
Gross yield
“If I rent it fully, what % of price do I collect?” — ignores HOA, tax, management.
Cap rate (net)
“After operating expenses, what % of value is NOI?” — closer to professional valuation.
Cash-on-cash
“On the cash I put in, what do I earn yearly?” — key if you use a mortgage.
Use case
When to use each metric
Compare gross yield only for quick screening between two similar condos. Use net cap rate to compare against other asset classes. Use cash-on-cash when financing — your return is on equity, not total price.
Do not compare brochure to bank
Numbers
Worked example — $350k Tulum condo
Gross yield
$28k rent ÷ $350k = 8.0%
Net cap rate
$18k NOI ÷ $350k ≈ 5.1% after HOA, mgmt, predial
Cash-on-cash
$12k cash flow ÷ $120k cash in ≈ 10% with mortgage
Plusvalía is separate — project it with the appreciation calculator.
Pitfalls
Common mistakes
- Using developer occupancy assumptions (often 70%+) without market data.
- Forgetting STR platform fees, cleaning and turn costs between guests.
- Ignoring months without rental income during pre-sale delivery wait.
- Mixing USD purchase with MXN expense estimates without FX buffer.
Tool
Run your scenario (canonical tool)
This glossary page educates — the ROI calculator is the single place to model your deal. We intentionally avoid duplicating the interactive tool here.
Related glossary terms
Deep dives on metrics and costs that affect the same investment decision.
Condo feesHOA fees in Mexico condominiums
What monthly HOA covers in QR and BCS, reserve funds, typical ranges in Tulum, and how fees change your net vacation-rental ROI.
TaxProperty tax (predial) in Mexico for investors
What predial is, typical rates in Quintana Roo and BCS, payment deadlines, and how property tax affects vacation-rental cash flow.
Tools & guides
Validate numbers with an advisor
Glossary content is educational — get a personalized scenario with verified inventory in Tulum, Los Cabos and Riviera Maya.
Preguntas frecuentes
What is gross yield in vacation rentals?+
Annual rental income divided by purchase price, before expenses. Example: $28,000 USD rent / $350,000 USD = 8% gross yield.
Are cap rate and yield the same?+
In casual talk, yes; in professional analysis cap rate typically uses net operating income (NOI) over value. Gross yield is more optimistic.
What is cash-on-cash return?+
Return on cash invested (down payment + closing), not full price. With 30% down, cash-on-cash can exceed yield on total price.
Where do I model Tulum numbers?+
Use Capital Turístico’s ROI calculator — this glossary explains concepts; the tool models occupancy, rate, fees and financing.
Más información en https://capitalturistico.com/recursos/glosario/cap-rate-yield-cash-on-cash-vacation-rental